How could the Biden Administration impact your business exit strategy?

During the recent presidential campaign, then candidate Joe Biden made several references to potentially raising the capital gains tax. As a business owner who may be considering an exit from your business, there are several implications to consider. While the amount of tax is not set in stone, there is little disagreement that taxes on capital gains will increase substantially. According to some estimates, the capital gains tax could increase from 20% to 39.6% for some tax brackets. This doubling of the tax could reduce the attractiveness of a sale and would require significant advisory support to minimize the tax impact. Ask yourself these questions:

• Do you plan to sell your business in the next 4 years?  
• Do you have an exit strategy?
• Have you considered the tax implications if you expect to sell?
• Do you know the basis in your business, which will be used for determining the amount of the capital gain realized?
• Have you considered different tax strategies with your tax advisor?
• Have you considered what changes might be required in your business to both reduce risk for a potential buyer and to maximize the value of your exit?

If you answered “yes” to any of these questions, then you may be ahead of the game. The reality is that the vast majority of business owners considering an exit have not asked these questions or are unaware of the tax implications of a potential doubling of the capital gains tax under the Biden Administration. 

If you are a business owner considering a business exit in the next four years, you should understand your options related to tax strategies as well as actions you can take in the near term to maximize the value of your business prior to putting it on the market.  Please contact Attaway Linville today at 803-831-0263 or 404-607-8400 to learn more about how we can help.