Comparing An Asset Sale of Business by C-corp versus S-Corp or LLC

By Kenneth H. Bridges, CPA, PFS     March 2011

Assume a selling price of $10,000,000, corporate capital gains rates of 34% and 6% for Federal and Georgia, respectively, and individual capital gains rates of 15% and 6% for Federal and Georgia, respectively.

S-Corp/LLC C-CorpDifference
Selling price $ 10,000,000 $ 10,000,000
Corporate level tax(4,000,000)(4,000,000)
Distributable proceeds 10,000,0006,000,000 (4,000,000)
Shareholder level tax (2,100,000) (1,260,000)(840,000)
Net to shareholders 7,900,000 4,740,000 3,160,000
Effective tax rate 21%52.6% 31.6%

Note:  The above analysis assumes that all gain is treated as capital gain as opposed to ordinary income, and assumes no “built-in gains” tax to be incurred by the S-corp.


Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP an Atlanta-based CPA firm.

This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice.  The article provides only a very general summary of complex rules.  For advice on how these rules may apply to your specific situation, contact a professional tax advisor.