Carefully review your options before making a decision

When it come time to sell your corporation, you have two options. You can either sell the corporation stock or have the corporation sell the assets and distribute the proceeds. The tax implications of the two sales are very different. If you choose to sell the stock, you are the seller. The corporation is not affected by the transaction. The new owner steps into your shoes as the shareholder and takes over the existing corporation. If your share of the proceeds exceeds your basis in the stock, you'll have a capital gain to report on Schedule D.

If the corporation sells its assets, the corporation may close its doors. The assets could be sold to one person who intends to operate a business similar to yours, but does not want your corporation. The corporation return will reflect the sale of the assets. When the corporation liquidates, your share of the cash will be reported on Form 1099-DIV as a liquidating distribution. You'll use Form 1099-DIV to report the sale of your stock on Schedule D. Selling assets of the corporation could result in double taxation. The sale of the assets is taxable to the corporation and the liquidating distribution is taxable to the shareholder.

If you are selling the corporation stock for a loss, you may qualify for special tax treatment. It's a good idea to review the tax consequences of the sale with your tax advisor before making a move.

Tax Tips Small Business

  • Determining Qualified Business Expenses

    Be sure to deduct every legitimate expense

    Amounts you spend in the course of conducting business are generally deductible from the gross income of that business. This includes any start-up expenses. You can claim amounts spent for items ordinary and necessary in your trade or business as a deduction against your income. Otherwise, the amounts are amortized, depreciated, or expensed depending on the nature of the purchases.

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Small Business Quick Tip

  • Employer Provided Education

    Employer-provided education assistance benefits of $5,250 provided under a written plan are excludable from wages. The education doesn't need to be job-related to qualify.
Saturday, 26th May 2018
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Tax Tips Personal

  • Giving to Charity

    New rules require diligent recordkeeping
    Keeping the receipts from your charitable contributions just became more of a priority. Starting January 2007, you will not be allowed to deduct charitable contributions of any amount unless you have the proof. What does this mean for you? Starting in 2007,

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Personal Quick Tip

  • Qualified Mortgage Insurance

    In 2016, premiums that are paid or accrued for "qualified mortgage insurance" in connection with home acquisition debt on your residence are deductible as home mortgage interest.