The tax considerations in structuring a purchase and sale of a business are driven by:
- the form of the consideration being given (equity interests in the purchaser, debt instruments, cash or other property)
- the nature of property received in exchange (equity interests or assets)
- the seller's tax basis in the property disposed of
- the buyer's expected tax basis (and resulting depreciation and amortization deductions) in the property received
- the type of business entities which are parties to the transaction.
The result is a seemingly bewildering array of choices, tradeoffs and even elections where the form of transaction chosen is ignored and is treated, for tax purposes, as being something else altogether (e.g., the 338(h)(10) election). Each choice made will affect the tax situation of both the buyer and the seller.
Tax planning for the acquisition of a business should start before it is acquired, and should continue throughout its period of ownership. Through our extensive background in advising buyers and sellers of businesses, we can guide our clients through the maze, identify the best available structures, and effectively implement the chosen structure.