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Thinking of selling your business? If you have planned it correctly, most of your transaction proceeds should be long term capital gains. Given the current political climate and the changes coming from the White House, capital gains taxes will come under attack.
If you are a business owner and are thinking of selling your business within the next 5 years, you may want to move up your exit timeframe.
The reduced 15% tax rate on capital gains, previously scheduled to expire in 2008, has been extended through 2010 as a result of the Tax Reconciliation Act signed into law by President Bush on May 17, 2006. In 2011 these reduced tax rates will revert to the rates in effect before 2003, which were generally 20%.
We believe that with the AMT currently targeted for elimination, the $800 billion will be made up by raising taxes elsewhere, and I believe this owner of capital tax is the most vulnerable for increase. I expect that the long term capital gain tax rate will be moved to an upper limit of 28% by late 2010 for the high end income bracket.
Translation, the business seller is going to take a big hit on his after tax proceeds if his business sale is concluded after November 1, 2010. Let's look at a quick example.
Dave Kauppi is a Merger and Acquisition Advisor with MidMarket Capital Advisors, LLC. MMCA is a private investment banking and business broker firm specializing in providing corporate finance and business intermediary services to entrepreneurs and middle market corporate clients in a variety of industries. The firm counsels clients in the areas of M&A and divestiture, family business succession planning, valuations, minority interest shareholder sales, business sales and business acquisition. Dave is a Certified Business Intermediary (CBI), a licensed business broker, and a member of IBBA (International Business Brokers Association) and the MBBI ( Midwest Business Brokers and Intermediaries). Contact Dave Kauppi at (630) 325-0123, email davekauppi@midmarkcap.com or visit our Web page www.midmarkcap.com.
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