If you have questions about the sales tax on the sale of a Florida business, then this article is for you. Whether you are buying or selling a business in Florida, it is vital to know exactly what taxes will be imposed and, most importantly, on whom. Read on to learn what you need to know about the sales tax on the sale of a Florida business directly from an experienced Florida Business Lawyer.
The Sales Tax on the Sale of a Florida Business – Understanding the Florida Capital Gains Tax
In the State of Florida, the capital gains tax is imposed on any profit a person makes from selling a business. However, the capital gains tax is only imposed when capital assets – such as equipment, machinery, and vehicles – are included in the sale. In other words, the capital gains tax is not imposed when the sale of a business only includes stock shares.
The capital gains tax is imposed on the seller of a business, not the buyer. How much the seller has to pay depends on whether the assets included in the business sale were held for a period longer than a year or shorter than a year. If the assets being sold were held for a period longer than a year by the seller, then the capital gain is long-term, and the long-term capital gain will be taxed at a rate no higher than 15% for most sellers.
On the other hand, if the seller has held the assets being sold for a period shorter than a year, then the capital gain is considered short-term, and the short-term capital gain will be taxed based on the seller’s ordinary income.
Some individual tax rates in Florida can be as high as 37%. Because of this drastic difference between the short-term and long-term capital gains tax, business owners generally avoid selling businesses that are not at least a year old.
When selling a business in the State of Florida, it is important to consider every single asset and determine whether they are or short-term or long-term, as this will have a massive impact on how much of what you make from the sale you will actually get to keep.
The Structure of the Business Being Sold Affects the Capital Gains Tax – Here is What You Need to Know
Generally, the structure of a business in Florida that is being sold affects the capital gains tax. In other words, whether the business being sold is a sole proprietorship, a Limited Liability Company, or a C-Corporation affects how the IRS imposes the capital gains tax on the seller.
A sole proprietorship and a Limited Liability Company can be considered “disregarded entities”, which means that they do not file commercial tax returns. Because of this, the IRS only imposes the capital gains tax once on the profits from the sale of this type of business entity.
C-Corporations, on the other hand, are different, as they have to pay a corporate tax, which means that the IRS imposes the capital gains tax twice on any profits from the sale of this type of business entity.
If you are looking to sell a business in Florida, it is important to know exactly what type of taxes you will need to pay so you can determine the impact these taxes will have on your profits and whether selling the business is actually a good move.