As the most experienced transportation industry brokers in the business, The Tenney Group team is equipped to make your medical transportation business sale as financially rewarding as possible. But don’t forget that with income comes taxation. While we can lead you to the closing table, it’s up to sellers to seek guidance from transaction tax specialists to properly plan for the bite Uncle Sam is bound to take from your proceeds.
Income vs. Capital Gains
There’s no getting around it; you will be taxed for the profit you earn from your business sale. But the type and amount of tax you’ll pay depends on whether the proceeds are taxed as ordinary income or as capital gains (or a capital loss). A capital gain is a profit resulting from investment into a capital asset, such as stock, equipment, real estate, or business goodwill. By the same token, a capital loss occurs when you lose money on your investment. When you sell individual business assets, however – such as medical transport vehicles, equipment, or other kinds of inventory – the amount you receive is considered income and taxed at your personal income tax rate. Capital gains taxes are usually preferable, because, if you have held the asset for over one year, the gains are considered long-term and taxed at a lower rate.
While you don’t have much control over the type of taxes levied on your company, you can control who is responsible for them. When a business operates as a sole proprietorship or partnership, the individual owners are liable for income, taxes, and debt. But by incorporating prior to putting your non-emergency medical transportation business for sale, the corporation – not the owners – becomes the responsible party. Additionally, companies that are able to qualify for S corporation status have the added benefit of avoiding the double taxation that occurs when certain profits are taxed at both the corporate and personal levels.
Terms of the Sale
Usually losing money is a bad thing. But during a business sale, capital losses can be used to offset capital gains. Owners can even deduct up to $3,000 in losses against their income each year. A seller can choose how to best leverage a capital loss by selling in either December (in which case the gains are applied to the current year) or in early January (in which case they would be applied to the following year). Payment method also affects your tax burden. If you require cash – in other words, a lump sum – you’ll be taxed all at once. Sellers who offer seller financing, however, can structure the transaction so as to delay taxes until all installment payments have been received.
If you’re like most business owners, it’s enough of a struggle to handle income taxes on your own. Attempting to manage taxes from a business sale can be a nightmare. Do yourself a favor and seek the support of transaction tax specialist. Taking the time to develop a comprehensive understanding of your tax liabilities before selling an ambulance business can reduce your liability and ensure you receive enough after-tax income to enjoy the fruits of your labors.