Q: How can I optimize a sale of business assets when the business is no longer in good standing?
In 2015, friends and I started a business. We allocated shares, and set up a vesting schedule. In 2016, we decided to allow the business license (Delaware) to lapse and operate with funds from an existing LLC business I own, however, the other partners do not benefit from the LLC business.
Our original business actually had two businesses that we worked on, and now in 2017, another company has offered to buy one of those businesses for a substantial sum. Will we be able to treat the sale as a long term capital gain as equity holders in the business being sold?
What is the strategy we should pursue to clean up our legal work and optimize the sale?
More information is needed to give you more detailed advice, but you have two basic options, revive the DE entity and sell the business or document the transfer of the business to the LLC and have it sell the business. The devil will be in the details. I would recommend you sell the assets of the business as opposed to the entity if you use the DE entity and liquidate it for capital gains purposes. Depending on the facts, there may be more options. I would contact a business attorney to assist you in this transaction as it will require some thoughtful drafting in certain agreements.
Assuming you have owned the business for more than 12 months you can get long-term capital gains treatment if the transaction is done correctly. You may have some recapture on some depreciation of assets. If you allocate part of the price to goodwill, that will be treated as the sale of a capital asset and the buyer will be able to depreciate it over 15 years.
1 user found this answer helpful
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.