The business sale process typically begins with an initial inquiry stage, during which owners try to get an idea of what their businesses are worth and whether selling makes sense. They are "sale curious" and have been thinking about it more than a time or two.
When a business is sold, big or small, taxes are inevitable. Three reasons that selling a business in the Trump presidency might be beneficial...here's a look into Trump's proposed tax changes, and what they can mean for selling a business in the upcoming year.
For personal taxes, there are currently six tax brackets, from 10% to 39.6%. Trump is proposing simplifying this to three brackets - 12%, 25%, and 33%. With fewer tax brackets and a lower maximum rate, this would mean an overall lower tax rate, especially if your income from selling your business today would bump you to a tax bracket above 33 percent. Trump also plans to cap itemized deductions at $200,000 for joint and $100,000 for single filings.
The capital gains tax is a specter for almost anyone who is selling their business: a tax on a capital asset (such as an investment or real estate) whose worth when sold is higher than the purchase price. The rate of taxes is based on income brackets and length of ownership of the asset. Trump plans on keeping the current rates (0%, 15%, and 20%), as well as the same short and long term (under and over a year). So, no major changes here, except for which bracket you may fall into.
One of the largest, and perhaps controversial, changes to the tax code is for businesses. Trump plans to slash corporate taxes from 35% to 15%. This includes business income to sole proprietors and individuals in LLCs and partnerships. Fewer business taxes means more profits, which leads to higher valuations and a better asking price. Keep in mind that Trump is also talking about eliminating most corporate tax breaks, which could affect you if you currently take advantage of any.
If you're considering the sale your business, let CBB help. As business brokers and M&A intermediaries in business for over 40 years, we're experts when it comes to getting you the best buyer and the best price. Let us help you understand the selling process, help you find a buyer, and be in your corner of the ring when it comes to negotiations.