Understanding Taxes When Selling Your Salon Business
Hey there, Susan Wos, here, if we haven’t met, I am the top salon business broker. Taxes when selling your salon business are a top concern our sellers have!
You’ve likely arrived on this blog because you are in the process of selling a salon business or you are preparing to exit salon ownership.
When it comes to selling a business, one of the most common concerns for salon business owners is what the tax costs will be from a successful sale. Understanding these implications can help you plan effectively and possibly save some hard earned cash in taxes.
I am going to give you an overview based on salon selling experiences and general information that are similar to discussions you would have with your accountant. However, remember that this is not professional tax advice- we are brokers, not accountants.
What Are Capital Gains in Selling a Salon?
Capital gains are essentially the profits you earn from selling your business above its book value. For example, if your business is sold for $1 million and the book value is $500,000, your capital gains would be $500,000. This is the amount on which you will potentially pay capital gains tax.
How Are Capital Gains Taxed?
The tax rate on capital gains can vary greatly depending on several factors, including your income bracket. If you sell your salon business and have no other income for the year, your capital gains can be taxed at a lower rate compared to another year where you do have additional income.
This fact makes it crucial to plan the timing of your sale. Think about the timing of selling your business before listing it for sale.
The Importance of the Salon’s Asset Allocation
How the sale price is allocated among various assets in the salon’s business affects your tax bill.
Different types of assets—such as furniture (shampoo bowls, chairs, etc.), fixtures, equipment, and intangible assets like goodwill, (client base),—are taxed differently. Smart allocation of sale price to different asset categories can influence the overall tax liabilities.
Consult With Financial Professionals
Navigating the complexities of taxes after selling your business is not a straightforward process. It involves understanding various tax laws and their implications on your specific situation.
Therefore, it’s highly recommended to work with accounting professionals, before, during and after the sale of your salon business. Accountants provide guidance tailored to your particular circumstances that help you understand how different decisions during the sale process can affect your taxes.
What to Expect After Selling Your Salon Industry Business?
After the sale of your salon, the focus shifts to what you will actually walk away with. It’s important to account for any debts that need to be paid off and the fees for salon business brokers, attorneys, CPAs and advisors used during the sale.
Typically, the tax liabilities from the sale are settled in the following tax year, which is when you will know the final amount of taxes due.
Conclusion
Selling your salon business is a big life and financial decision with complex tax ramifications. It’s essential to consider these implications as part of your overall strategy for selling your business.
By understanding the basics of capital gains, consulting with professionals, and strategically planning the sale, you can better manage the financial outcome of your business sale.
Remember, every salon industry business situation is unique, and the information provided here should serve as a general guide. For personalized advice, always consult with a professional accountant or tax advisor.
Contact Salon Selling Experts!
If you have any questions or need advice on selling a salon industry client base or business, feel free to reach out to us. Thank you for reading, and we wish you the best in your business endeavors!
Yours in service,
Susan Wos, Lead Salon Business Broker & Founder of Salonspa Connection
