Wick & Trautwein, LLC
Call Today
Local: 970-237-5694
Toll Free: 866-686-1410

Business formation affects your company's sale price

The way a Larimer County business is set up determines the entities responsible for taxes. A company's tax structure also impacts the sale of the business, something some Colorado entrepreneurs don't think about until a sale is under consideration.

Understandably, new business owners are concerned about immediate benefits. It's difficult to imagine selling when you're trying to get or stay up and running. However, advisers suggest thinking about long-term tax implications at the time of business formation.

As an attorney can explain, C corporation and Subchapter S corporation structures have distinct advantages and disadvantages. Taxes on profits for Sub-S corporations are paid by owners and investors – the corporation is not taxed. C-corporation businesses are taxed as separate entities.

Double taxation can be a burden when C-corps companies are sold. This can be a real concern for asset sale buyers and private equity investors, who are likely to prefer "flow-through" S corporations. You still have legal options, even if you already have a C-corporation, although options narrow the closer you are to a time of sale.

Sloppy recordkeeping can impact a business sale. For instance, some companies are extremely zealous about issuing stock to new hires. Tax mistakes can show up at the time of sale when company stock is given haphazardly without consulting the board of directors or an attorney.

Accounting methods and personnel must be kept up to date to avoid unpleasant surprises prior to a business sale. It's advisable to reevaluate accounting practices regularly, particularly during periods of significant growth. Also make certain asset identification includes a fair accounting and legal protection of intellectual property.

A buyer will be looking for ways to reduce the purchase price. Don't wait until an asset sale offer has been made. The time to speak with a corporate counselor about a possible business sale is long before the offer is on the table.

Source: Forbes, "Start Planning For The Sale Of Your Business On Day One" David King, Dec. 19, 2014

No Comments

Leave a comment
Comment Information
  • Lead Counsel Rated | LC
  • BBB | Accredited Business
  • 10 Best 2017 Attorney | Client Satisfaction | American Institute Of Family Law Attorneys
  • Preeminent AV | LexisNexis Martindale-Hubbell | PeerReviewRated
  • Best's Client Recommended Insurance Attorneys Listed Over 25 Year
  • Expertise Best car accident Attorneys in fort collins 2018

Fort Collins Office
323 South College Avenue #3
Fort Collins, CO 80524

Toll Free: 866-686-1410
Phone: 970-237-5694
Fax: 970-482-8929
Fort Collins Law Office Map

Windsor Office
421 Main Street
Windsor, CO 80535

Toll Free: 866-686-1410
Windsor Law Office Map

Review Us
Providing You With The Information You Need To
Make The Right Choices For Your Future

We Take Your Emails Seriously

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy