One of the “core” retirement planning objectives of many business owners I meet is to sell their company for a lot of money and get the proceeds tax free thanks to the Capital Gains Exemption for “Qualified Small Business Corporations”.
The catch is that few business owners stop to check if they are actually owners of “Qualified Small Business Corporations”.
A few surprises that I have seen are:
The business owner didn’t own the company that they sold. It was actually owned by another family member or by a holding company. As a result, the business owner didn’t get the cash or didn’t get the Capital Gain Exemption and perhaps neither did the other family member or the holding company (generally holding companies do not get this special exemption).
The company being sold wasn’t a “Qualified Small Business Corporation”. The business owner didn’t consult with a properly qualified accountant before making the sale.
The company being sold was not a corporation at all. It was an unincorporated division of something or somebody else.
If you stop and take a look at the actual cost of making a mistake here, it is worth taking to a properly qualified accountant first.
On a $2 million dollar sale price for a business that was started for $1, we are talking about a minimum of approximately $1,640,000 and a maximum of approximately $437,000
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