Settling Up Taxes When Selling a Business

When selling a business, the buyer during due diligence may ask amongst other things, licenses, trademark verification, and tax returns on the business.

Nothing construed herein is tax advice which you will want to consult a CPA for such, but this acquisition advice to help you close a deal.

Let’s say it’s February and you didn’t file the most recent tax return yet.

It’s understandable you did not do taxes yet for the prior year if it is due in April, but the buyer may ask you to file.

You obviously have to pay taxes on your business eventually but there are risks paying early if you were not required to, just because you think the deal is going through.

Our recommendation is to always file taxes and pay on tax money that you are late on right away, before you were to sell the business or even entertain a buyer, but anything that you are not late on that the buyer is requesting is not necessarily something you have to file and pay on. To give a buyer who may or may not come through peace of mind is not justified in every situation.

The general rule of thumb, is to file and pay on anything you are late on and everything you are not late on, that’s a trickier scenario that is done by a case by case scenario based on what the post-acquisition scenario looks like.

If a buyer is asking you to settle up taxes in order to close, you do not have to write a check for the full amount of your taxes.

Instead of asking for a larger deposit to do so or to close earlier out of risk of losing rapport, you may just want to file and pay over time on your taxes.

If you are worried that the deal might not go through, you can file and pay over time. Look, you have to pay your taxes any way. You might as well file an extension on anything that you need more time to gather funds or calculations, or you can file on time and pay the money out over time if you just need time to regroup the money.

You can file the return and pay $0 with the return if you want (we always recommend to pay as much as you can upfront) and then spread the payment out with them on their website which you can typically spread out over 72 months.

Everything else the buyer is asking for, either provide or send a detailed explanation as to why you can’t.

Once you sell your business, you will have to file another return that closes out the business, if it is dissolved.

The taxes that will reflect your sale will most likely amount to capital gains which is the difference between the purchase price and sale price, but your CPA will walk you through what happens when you sell the business.

Please reach out to us if you have any questions relating to acquisitions:

Email – acquisitions@jarbly.com

Phone – (800) 773-1523

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JARBLY’s focus is on business consulting with an emphasis on creating disruptive ventures and high quality boutique services to enhance a business’ valuation and lead to a high quality exit. As JARBLY has been heavily involved in the digital space including its own ventures for a decade with servicing hundreds of clients around the world, it is very well versed with understanding technical aspects of a deal including value proposition, product offerings, marketing, metrics, ROI, moats, and value-add initiatives. JARBLY has the expertise and knowledge on various businesses, industries, and deals and is very creative with structure to help increase valuation, or help guide you to a strategic exit. JARBLY has helped brands grow and also cultivates business related and real estate opportunities that are ripe for acquisitions, helping buyers and sellers get what they are seeking from a deal.

Whether it comes to growing your business, including acquiring businesses you want to understand the deal. We understand deals and where the maximal value in a transaction is. Our bread and butter is to provide a win for our clients including positioning your company for an eventual high quality exit. We have the unique and uncanny ability to bring high quality materials to the table and renewed strategies that consistently work. We help with financial enhancements, implementing systems, and prepping your business with materials including Prospectuses, Confidential Information Memorandums, and high quality Value Proposition Decks.

JARBLY looks forward to working with you to enhance your business profits nad valuation and help you on your next acquisition, exit, or real estate opportunity including both commercial and high end residential properties with high end service from a qualified team of passionate individuals that help you secure the deal. JARBLY LLC is part of Trend Realty in Sarasota, FL operating the Boca division as the JARBLY team.

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Text or call (800) 773-1523 and Jaret can arrange to have a brief consultation with you at your business location before embarking on a series of consulting calls or a full immersion.

Settling Up Taxes When Selling a Business