Ophthalmology Business

FEB 2013

Ophthalmology Business is focused on business topics relevant to the entrepreneurial ophthalmologist. It offers editorial, opinion, and practical tips for physicians running an ophthalmic practice. It is a companion publication of EyeWorld.

Issue link: http://digital.ophthalmologybusiness.org/i/108440

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The tax consequences of selling your practice by Brad Ruden, MBA W hen selling a practice, one of the most important factors to consider—but often the last one addressed —is the tax consequences resulting from the sale. The taxes owed by a seller can vary substantially depending on whether or not it was a stock or asset transaction. In this article we are taking a very simple look at both types of transactions and the general tax consequences involved. Stock transaction In my 22 years in the business, I have only brokered a couple of practice sales that were stock transactions (and those were for unique reasons). The great majority of practice sales are asset sales because when purchasing stock, the buyer assumes all of the liabilities, past and present, known and unknown, of the entity being purchased. Because of this, the great majority of practice sales are asset transactions (where no such liability is assumed). In a stock sale, the corporation is the legal owner of the business. In most cases, the purchase price may be allocated completely (100%) to the sale of the stock, and the seller is taxed entirely at the capital gains rate, which is typically lower than the ordinary income rate. Not all stock transactions have a 100% stock allocation. In some cases, the purchase price can be allocated to the company's stock in addition to post-sale service contracts or a personal non-compete. In instances such as this, the tax ramifications for the seller would be: 16 Ophthalmology Business eZine • February 2013 Back to TOC

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