If your business is a sole proprietorship, a sale is treated as if you sold each asset separately. Most of the assets trigger capital gains, which are taxed at favorable tax rates. But the sale of some assets, such as inventory, produce ordinary income.

Can an LLC sell its assets?

If you are a sole proprietor, not incorporated, your only choice is to do an asset sale, as you have no corporate entity to sell. That said, a corporate entity such as an S-Corp or LLC can sell its assets and do an asset sale between it and an individual or another company.

What tax do I pay when I sell my business?

In the sale of a company, your tax obligations will depend on whether the sale is an asset sale or a share sale. For a share sale, you will only pay capital gains tax on the profits from the sale of the shares. For basic rate taxpayers the rate is 10%, while for higher-rate tax payers it is 20%.

How is an asset sale different from an entity sale?

If your business is a public corporation, then you would conduct an entity sale simply by selling shares of stock to your company. But if you sell your business with an asset sale, you are selling only the assets (tangible and intangible).

What happens if I want to sell my LLC?

A buyer might only want to purchase your business’s assets, or he or she may decide to buy the entire company. If you want to sell an LLC, you’ll sell your membership interests via a bill of sale. You can sell your interests for the amount you want if you operate a single-member LLC.

Can a single member LLC sell its interests?

You can sell your interests for the amount you want if you operate a single-member LLC. However, if you’re part of a multi-member business, your operating agreement may have strict rules in place that keep the business value at a certain amount.

What are the tax consequences of selling a LLC interest?

For individuals, the maximum tax rate on ordinary income is often nearly 20 percentage points higher than on long-term capital gain. But to determine which rates apply, we need to know the makeup of the LLC’s assets. While the sale of LLC interests often results in capital gain, there are very large exceptions.