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-Corp | Difference | |
| Selling price | $ 10,000,000 | $ 10,000,000 | |
| Corporate level tax | (4,000,000) | (4,000,000) | |
| Distributable proceeds | 10,000,000 | 6,000,000 | (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.