Tax Implications of Selling A Business...

I ran across this article that highlights an important issue when you decide to sell your business.  Qualified sellers can avoid this altogether by using the Delta Solution.  Learn more at www.deltabusinessservices.com- Heath

Tax Aspects of Selling Your Business: An Overview

When you sell your business you may face a significant tax bill. In fact, if you're not careful, you can wind up with less than half of the purchase price in your pocket, after all taxes are paid! However, with skillful planning it's possible to minimize or defer at least some of these taxes.

You will be taxed on the profit you make from selling the business. You may be able to control the timing through the terms of the deal, but the IRS will take its share at some point. 

The amount of tax that you will ultimately have to pay depends upon whether the money you make from the sale is taxed as ordinary income or capital gains. Profit received from the sale of the business assets will most likely be taxed at capital gains rates, whereas amount you receive under a consulting agreement will be ordinary income.

Allocation of Sales Price Governs Tax Consequences

If you negotiate a total price for the business, you and the buyer must agree as to what portion of the purchase price applies to each individual asset, and to intangible assets such as goodwill. The allocation will determine the amount of capital or ordinary income tax you must pay on the sale. It will also have tax consequences for the buyer. 

What is good for the tax picture for the seller is often bad for the buyer and vice versa, so the allocation of price to various components of the deal is frequently an area for negotiation and compromises.

(read the whole article at http://www.bizfilings.com/toolkit/sbg/run-a-business/exiting/tax-aspects-of-selling-business.aspx)