Whether you are selling or purchasing a business in Florida, it is important to know what taxes will be imposed, and on whom. On average, the profits an individual makes from selling a business is what is actually taxed.
The Florida Capital Gains tax
In Florida, the capital gains tax is the tax imposed on any profit an individual makes from selling their business in Florida. This tax is only imposed when capital assets are sold, such as machinery, equipment, and vehicles, but not on stock shares. This taxed is imposed on the seller. How much tax is imposed is contingent on whether the assets being sold were held for more than one (1) year, or less than one (1) year.
If the assets were held for more than a year, than the capital gain is long-term. There, the long-term capital gain is taxed at a rate no higher than 15% for most individuals.
If the assets were held for less than a year, than the capital gain is short term. There, the short-term capital gain is taxed based on an individual’s ordinary income, based on the individual’s tax rate. Some individual tax rates can be as high as 37%. This drastic difference between the long-term and short-term capital gain tax is an incentive for individuals to avoid selling their business if it was created less than a year from the selling date.
When selling a business, you must look at every single asset to determine whether they are long-term or short-term.
Does the structure of a business affect the capital gains tax?
Generally, whether a business is an LLC, a sole proprietorship, or a C-Corporation affects how the capital gains tax is imposed.
Capital gains tax when selling an LLC or Sole Proprietorship
An LLC and a sole proprietorship can be considered “disregarded entities”, as a result, they do not file commercial tax returns and the capital gains tax will only be imposed once.
Capital gains tax when selling a C-Corporation
On the other hand, a C-Corporation pays a corporate tax and therefore, the capital gains tax is imposed twice on any profits from the sale of a C-Corporation.
If you are looking to sell a business, it is important to be prepared for what type of taxes, and how much taxes, which will be imposed on your profit.