Here at Gulfstream Mergers, we strive to provide a comprehensive understanding of all factors involved in selling your business. A key component to consider is taxes on selling business in North Carolina. The taxes you’ll owe will hinge on the structure of your sale – either as an asset sale or a stock sale.
In an asset sale , you sell the individual elements of your business such as property, equipment, and inventory. Buyers often favor this approach as they can selectively acquire assets and allocate the purchase price among these assets for potential tax benefits.
Conversely, a stock sale entails selling your complete ownership interest in the business. This includes all assets, liabilities, and potential future responsibilities of the business. Sellers may prefer this approach for its ability to provide a clean break from the business.
Now, let’s examine how taxes on selling business in North Carolina apply to these types of sales.
If your business is a sole proprietorship, partnership, or an LLC, an asset sale is seen as the sale of individual assets. The tax you’ll pay on gains from these sales will depend on the nature of the asset and your specific tax bracket.
When calculating taxes on selling business in North Carolina, it’s important to know that the state applies a flat tax rate of 5.25% on individual income, which includes capital gains. At the federal level, the long-term capital gains tax rate ranges from 0% to 20% for most assets, based on your income, with certain types of assets potentially being subject to a higher rate.
For depreciable assets like equipment or property, depreciation recapture can come into play, wherein the gain may be taxed as ordinary income rather than capital gains. This can be as high as 37% federally, in addition to North Carolina state taxes on selling business.
For corporations, the sale of stock is generally classified as a capital gain or loss. The taxes on selling business in North Carolina, in this case, are less complicated than an asset sale. The state’s 5.25% flat tax rate applies to any gains, coupled with the federal long-term capital gains rate.
Remember, these tax considerations provide a general guideline. Each business sale has unique attributes that can significantly influence the eventual tax liability. We strongly recommend consulting with a tax professional or CPA before making any decisions about selling your business.
At Gulfstream Mergers, our expertise extends to taxes on selling business in North Carolina, among other transactional aspects. We’re here to guide you through the complexities of your business sale, ensuring the most beneficial outcome. Contact our team of experts for more information.