General
How Much Tax Will You Owe if You Sell Your Florida Business?
Selling your business can have many benefits. It could allow you to achieve your dream of early retirement. It could allow you to take advantage of the market and move onto another bigger and better project. It could even allow you to avoid the stress of an upcoming challenging period in your industry.
Whatever the reasons and benefits for selling your business, you must realize that doing so will have tax implications. Selling a business in Florida will come with taxes, as the government will be looking to take their portion of your earnings.
Understanding what taxes you will have to pay, and how much they will amount to, is important when you plan to sell your business in Florida. Unlike other costs of selling your business – such as legal fees, paying off equipment and other expenses – capital gains taxes will not be handled at the business closing.
What is Florida’s Capital Gains Tax?
This may be foreign to many people who own a business in Florida, as the state does not impose state income taxes on businesses unless they are set up as a C corporation. However, capital gains taxes are applied to the profit you make from the sale of your business in Florida, no matter what structure your business takes.
The rate of capital gains tax you will be required to pay depends on a number of factors, including the structure of your business and how the allocations of the sale are determined. Long-term capital gains on assets that have been held longer than 12 months, for example, are taxed at a significantly lower rate than other types of income.
From a tax standpoint, the sale of your business will be treated as a sale of a collection of assets. The purchase price of your business will be allocated among the assets – such as any property you own, equipment, inventory, accounts receivable and trade name. The capital gains tax will then be applied to each asset accordingly.
How the Business Structure Influences Capital Gains Taxes
If you are selling a Limited Liability Company or a Sole Proprietorship, you will luck out. You will only be taxes one time as a capital gain tax, because the government considers these types of business as disregarded entities. You won’t have to file a commercial tax return as a result.
If you are selling a C Corporation, in contrast, you will get taxed two times at the sale. First, the company must pay its corporate tax. Then, each individual who profits from the sale must pay capital gains taxes on the money they earn.
How Do You Figure Your Capital Gains Taxes?
Unfortunately, how much you will pay in capital gains taxes if you sell your Florida business is too difficult to figure out in a general, across-the-board way. What your tax liability will be is based upon the structure of your business, its asset allocation and how long those assets have been held for, as well as the profit you realized from the sale.
The best thing to do if you’re about to sell your Florida business, then, is to consult with a tax professional who can help guide you through the sale so you are well prepared for every financial angle that will come your way.
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your buying and selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing, Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222. View available Businesses for sale in South Florida.
