Selling a business is exciting, especially if you can maximize its value. The common problem a business owner faces is the tax cut on the gains from the sale which can quickly reduce the proceeds from the sale of the business. However, this should not be a cause of worry because, with careful tax planning, tax liabilities can be legally reduced.
Exit planning involves having strategic plans in place when you transition out of your business either because of a sale, retirement, or in some cases, due to expatriation. This process can significantly reduce the risks, challenges, interference, or even taxes.
The tax exit strategies are in place for the owners to meet their set financial, personal, and business goals as they transition and include these key components:
Some citizens of the United States who decide to give up their green card status are subject to an exit tax or an expatriation tax. Not all who renounced their US citizenship, however, are subject to the expatriation tax. There are certain threshold or exit tax rules to meet:
There is a $767,000 capital gains exemption for a covered expatriate. Anything beyond that is going to be charged an exit tax which is based on the below calculation:
It is important to get the help of tax professionals to avoid potential issues during the process of expatriation and settlement of any exit tax obligations if there are any.
Succession planning is important even if you do not have any plans for an Exit yet. A lot of it has to do with protecting the stakeholders of the company and ensuring business continuity. But more importantly, this is an efficient exit strategy.
Among its other benefits are the following:
An entrepreneur’s focus is not just on running a profitable business but also on working on scalability and making an exit strategy for the eventual exit in the near or far future. Part of creating an exit plan is outlining an effective tax plan.
Outlined below are the key benefits that entrepreneurs will get for having exit planning tax strategies in place:
Entrepreneurship is more than just working for the survival of the business – it is also about planning ahead to ensure the continuity of the business while increasing its potential business value.
Richard Ehrlich provides a tax efficient exit strategy for entrepreneurs who have already decided to move out of their business. These strategies are mainly focused on managing their tax obligations to minimize the tax liabilities at the time of exit or transition.
Being tax compliant is important even during exit. Using the tax exit strategies provided by Richard Ehrlich can help maximize the proceeds from the exit by careful planning that includes a combination of choosing the right time to exit, deal structuring, and tax incentives leveraging.
By applying tax-efficient strategies, the business achieves long-term financial security and avoids potential tax evasion problems. So, even when you have decided to seek the help of experts who can help you optimize the business operations to increase the valuation of your business, do not skip the part where you have to hire tax professionals who can help you maximize the value of the business without reducing the proceeds from the sale due to taxes.
It is not just big businesses that have to deal with the tax implications during an exit during the tax year. If anything, small businesses also deal with complicated taxes depending on how the business is structured and where it is located.
To avoid tax pitfalls, small businesses also need to make a tax plan to reduce their tax liabilities, avoid hefty fines and penalties, and stay compliant throughout the life of the business.
Here are some tips that small business owners can take:
Running your own business is not an easy task but it is imperative that as business owners, you have a long-term financial plan for the success of your business and ensure its sustainability. This financial plan, however, is not just limited to the business but also includes making plans for your personal finances.
Being on top of your financial plan can help you manage all the financial aspects of your life successfully.