Thursday, December 10, 2015

Tax Structuring Solution for Purchase or Sale of a Business

By Peter J. Kulick

At a Departmental training session earlier this year, I explored the U.S. federal tax considerations that may arise in connection with the sale of a business. There is no “one size fits all” tax structuring solution for the purchase or sale of a business. The transactional structure will often be influenced by the bargaining power of the parties and by the party that is more motivated to consummate the deal.

The structure of the purchase or sale of a business can produce significant tax consequences to the parties. The U.S. federal tax consequences to the parties to a purchase or sale transaction will be dictated by several factors, which can include: the tax classification of the entity conducting the business; the structure of the transaction; the type of business activities of the target and the nature of the business; the tax positions of the parties, such as having large net operating loss carryovers; and the geographic location of the parties, (e.g., cross-border transactions).

The bottom line is, however, that early involvement of a tax attorney can help facilitate structuring a tax-efficient transaction.

If you have any questions, please contact Peter Kulick in our Lansing, Mich. office at 517-487-4729.