Selling Your Business Before the New Year

If you’re planning on selling your business sometime in the next few years, now might be the ideal time to do it. That is to say, right now.

Why? Because of the capital gains tax. Just to make sure we’re all up to speed, capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realized on the disposition exceeds the purchase price.

Right now, the capital gains tax stands at 15%. Unless Congress passes new legislation, on January 1, 2013, the capital gains tax rate will increase to at least 20%. Some analysts are predicting that that the new rate will probably be even higher than 20%, given our growing budget deficit and need for new revenues. Keep in mind that on top of this likely increase, 2013 will also introduce increased Medicare taxes that could add a 3.8% tax to all investment income. So ultimately, unless Congress moves to change this, the combined tax bite will be closer to 24% from the 15% of today. That may not sound like much, but it represents nearly a 60% increase in the capital gains tax rate.

Consider also that the market may soon be flooded with businesses for sale as Baby Boomers retire over the next 15 years. If the number of businesses available for sale outweighs demand, the value of those businesses could be adversely affected.

If you plan on selling before the end of the year, remember that an important first step is to learn your business’s worth by getting it appraised by an experienced and reputable professional.

Categorias: Asset Management

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