Comments by "Jeremy Barlow" (@jeremybarlow2291) on "How to Avoid Capital Gains Tax when Selling a Business" video.

  1. In the US, the best way to avoid the capital gains tax you presented would be to have structured the company as a C-Corp early on and held founders shares under 1202 of the code as a qualified small business, at least after 2010 when the current exemption rate was put into place. In that scenario, assuming the company stock was held 5 years, up to $10 million of gain or 10x the original basis, whichever is greater is exempt from capital gains tax assuming the company has less than $50 million in assets. Why would anyone sell a business with $50 million in assets for $12 million? That would mean instead of paying $2.4 million in federal income tax, the seller would pay $400k in income tax under the current 20% federal capital gains rate. Assuming arguendo the founder is a resident of a zero income tax state like Nevada, Florida, Wyoming, South Dakota, Texas, or Washington, that would be the entire tax bill due. The 1202 provisions of the code make a C-Corp a smart move for any business owner with an exit strategy that has an eye towards selling the business. A healthy salary can eliminate any double tax issues and given the discount presently available for dividend income on Qualified Dividends, that isn't much of an issue these days. The C-Corp also provides additional avenues, especially for the offshore founder to greatly reduce taxes with expenses such as per diems, the FEIE, the Foreign Housing Exclusion, and other travel related business expenses, and or insurance coverage provided by the company to the founder as a means of getting money out of the company with the lowest tax impact.
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