Tax tip for small business owners: Get incorporated

You can get an exemption that could save you thousands

  1 Premium content image

by

From the April 2016 issue of the magazine.

  1 Premium content image

tax tipEvery small business owner has an opinion about whether to remain a sole proprietor or to incorporate, but here’s a situation in which you might want to do the latter: You’re selling your company. Why does it matter? Because someone selling an incorporated business can keep $813,000 of the sale proceeds under the lifetime capital gains exemption. Anything above that amount is subject to capital gains tax, but anything below that is yours, says Dorothy Keating, a St. John’s–based accountant with Noseworthy Chapman. Otherwise, a sole proprietor selling assets, such as client lists, will have the entire proceeds taxed.

The bottom line: Making use of the lifetime capital gains exemption can save you hundreds of thousands of dollars.

See more tax tips here.

One comment on “Tax tip for small business owners: Get incorporated

  1. Bryan,
    To make a blanket statement such as “a sole proprietor selling business assets will have the entire proceeds taxed” is erroneous and misleading. The total proceeds from the sale of a business woukd be allocated to different asset classes on a reasonable basis and the historical costs of those assets would be deducted from the proceeds resulting in a gain or a loss.

    Reply

Leave a comment

Your email address will not be published. Required fields are marked *