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Commentary and Analysis Regarding Colorado Law

Sale or Purchase of Business Assets Don’t Forget the Government’s “Share”

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The sale or purchase of a business involves The sale or purchase of a business involves many decisions which create tax impacts for the parties involved, both at the time of closing and in the future. While the media reports focus on multi-billion-dollar mergers and acquisitions, most business transfers involve far less in the amount of money involved, but each sale or purchase represents a large investment of money, time, and emotion in the business by both the seller and buyer. In every transaction, the taxing authorities, either as a result of the completion of the sale of a business, or in the future as the business continues to operate, will receive taxes from the seller or buyer.

Businesses can be sold in a number of ways, including the sale of stock or limited liability company membership interests, however most purchasers do not want to assume the potential risk of past tax or operating liabilities of the business entity, or the purchaser does not want to inherit the tax basis of the business entity in the various assets which have been partially or fully depreciated.  Accordingly, for the bulk of business transfers, the seller and purchaser will structure the business sale as an asset sale and purchase.

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