Legal Question in Business Law in California

Re: Selling my business

You would have to pay a capital gains tax to the State and Federal governments on the gain over the cost of the establishment of your business. Your accountant can assist you in establishing that amount. It will make absolutely no difference that you started the same, but another business in another state.

Re: Selling my business

Selling your business can have varying tax ramifications depending on how the sale is structured--the relevant issues are complicated and you should seek help in structuring the sale. Whether or not you compete depends on the deal you structure, and the applicable law (different states have different rules).

Feel free to contact me to discuss further. 310-442-3577

Re: Selling my business

Is your business incorporated, or a proprietorship? If you are incorporated, you might be able to sell the assets, keep the stock and the corporation, and use the shell with tax carryforwards in place for creating a similar business elsewhere.

The tax impact of the sale of a business depends upon the following:

(1) The structure of the business (corporation, partnership, LLC, proprietorship, etc.).

(2) The difference between the seller's net investment and the selling price. The difference can be positive, i.e creating a capital gain, or a loss.

(3) If a corporation, whether it has operated as an "S" election pass-through entity or as a "regular" ("C") tax-election corporation.

(4) Whether the business has taken accelerated depreciation or anything else subject to "recapture" by the IRS.

(5) Whether the price is paid all at once, or over a period of years.

(6) In certain cases, folding up a company that has had losses can create large tax deductions for the shareholders.

As far as restraint on opening a similar business elsewhere, there is no tax reason I can think of that impedes you, but your buyer might want a non-competition covenant from you. These can be enforced in most states if they are reasonable, but a covenant reaching well beyond the business' customer area (and into another state) would probably be deemed unreasonable and thus could not be enforced. In any event, you are in control of what your sale agreement allows or forbids. Simply avoid negotiating or signing a deal you can't live with.

A business attorney can assist you with pricing, structuring and negotiating the sale to your advantage.

Re: Selling my business

Both the taxes and ability to compete are largely contractual. In other words, what the contract states.

We negotiate the sale of many businesses. If you would like further assitance, please let me know.

Re: Selling my business

In addition to capital gains or income tax, you may have to collect sales tax on the value of the assets you sell. Also real property the business owns in California may be reassessed at current value under Proposition 13. All of these questions should be reviewed by an experienced attorney and the sale structured to minimize tax and avoid post-sale disputes.