How To Sell Your Small Business And Pay No Taxes

So, you want to sell your small business? The good folks in Washington have a dandy tax break exempting you from all federal taxes on the sale—provided that you own a C corporation.

A lot of attention has gone to the special "pass-through business" break from the new tax law. This benefits income from S corporations and others like it, giving owners a 20% exemption on their business' earnings. That highly popular provision in the Tax Cuts and Jobs Act makes it seem like small business owners would be idiots to classify their company as a C corp.

Well, except for the terrific advantage you get as a C corp seller, which has been available for many years. Aside from the TCJA exemption and the lack of double taxation, C corps are taxed at the corporate level and then the owners get taxed on what they reap after that. In contrast, pass-throughs, like S corps, LLCs, and other partnerships, are only taxed once. C corp shareholders pay zero tax on a company sale, as long as they acquired the shares on or after Sept. 28, 2010. That's a huge tax break!

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This article was written by a professional financial journalist for Cardinal Capital Management, LLC and is not intended as legal or investment advice.

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