If you are selling a business in Washington, you need to consider the tax implications that could follow. For many business owners, the actual business sale can feel like the finish line, but you need to be prepared for the business sale taxes so that you aren’t surprised later on. So, keep reading to find out what federal and state taxes you may have to pay when selling a business in Washington.
The first thing Washington business owners need to keep in mind is that there are two types of business sales taxes they may need to pay: federal taxes and Washington-specific taxes. And not all types of taxes will apply, especially since every state has its own rules. For example, there is a federal ordinary income tax for business sales, but this does not apply to Washington sales since there is no individual or corporate income tax in Washington State.
Here is an overview of some of the most common federal business sales taxes that may apply to your sale:
It’s important to plan ahead for taxes with the help of a legal professional since every business sale will be unique and will be subject to different taxes, so there isn’t a one-size-fit-all solution.
The good news for business owners is that the Washington-specific business sales taxes are not usually significant. Here are some of the state-specific business sales taxes you may be liable for:
One aspect of a business sale that will greatly influence your tax liability is whether it is an asset sale or a stock sale. For example, in an asset sale, the buyer will be purchasing specific assets and their liabilities. Whereas in a stock sale, this is usually treated as a capital gain, which can result in long-term taxes.
Although not all business sales taxes are avoidable, there are some ways that you can minimize your tax liability. When you work directly with a business attorney in Vancouver, WA, they can help you come up with a strategy that reduces your tax responsibility as much as possible.
One of the most common strategies business owners can use is installment sales. This is a strategy that structures the sale so that payments are received over a long period of time, which also spreads out the tax liability. Or, if you own a corporation, you may be able to structure the sale as either a stock or asset sale, which can impact the type of taxes you are liable for.
Before you proceed with selling your business in Washington, you need to consider the business sales tax implications. Knowing what to expect in advance can help you minimize some of your tax responsibilities and prepare for the taxes you will need to pay.
At John L. Davis PLLC, our business sales tax lawyers are here to help you better understand the tax implications when you sell a Washington business. Contact us today at 360-597-4740 to discuss your situation with an experienced attorney.
site by LegalRev