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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 577
Experience:  10 years experience
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I am working with a client who is selling an LLC with 2

Customer Question

Hello, I am working with a client who is selling an LLC with 2 partners in an Equity Sale. They have years of negative retained earnings and a lot of debt. The sale is a fixed price with a stipulation that all debt is paid off from the monies from the purchase. After the outside debt, there are loans to the owners to be paid off. The big issue is the Capital Gains that the 2 owners are being told they will pay from the sale. Is there any other creative options to reduce their tax hit such as selling the company for less and letting the new owners pay off some of the liabilities?
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: Not yet
Submitted: 3 months ago.
Category: Tax
Expert:  Mark Taylor replied 3 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. It would be the same result if the buyer agreed to assume some of the liabilities. Being relieved of liabilities is the essentially the same as receiving the additional cash.

Expert:  Mark Taylor replied 3 months ago.

If the majority of the gain is a Capital gain, the members are receiving a tax preferred tax rate.

Expert:  Mark Taylor replied 3 months ago.

Is the LLC being treated as a S-Corporation?

Customer: replied 3 months ago.
Even in an Equity Sale? If the buyer is assuming the Accounts Payable and Accounts Receivable they are receiving monies earned by the previous owners that have not been received yet.
Expert:  Mark Taylor replied 3 months ago.

How is the LLC being treated as a partnership or as an S-Corporation?