When someone buys or sells a business in Louisiana, the resulting capital gains will affect their annual tax returns. Capital gains are handled differently than typical income that’s based on profits from the business; instead, they come from the sale of a capital asset. There is a tax assessed on all capital gains, and this can apply to the direct sale of a company as well as shares of stocks and similar securities. Capital gains tax assessment only comes into play if the seller makes a profit or takes a loss on the sale of the asset.
While short-term capital gains for assets held less than one year are taxed at the same rate as regular income taxes, long-term capital gains, for assets held for over a year, are taxed at a 17% rate. Most types of property held by a business, whether physical or intellectual property, can be considered capital assets, especially when they are sold as part of the company. For example, merchandise, inventory, patents, copyrights, real estate and investments are all considered capital assets and subject to capital gains tax if sold. Even accounts receivable that can be sold are considered capital assets. However, personal property and raw materials are not considered capital assets.
However, businesses can still sell off individual assets without converting the income to capital gains. For example, a company could sell its furniture and buy new goods; this would be counted as ordinary gains rather than capital gains. The same would be true if the firm sold off its vehicles while continuing to do business.
When business owners buy or sell a company, they may want to pay attention to the tax implications. An attorney could provide advice and guidance on managing the sale, and this could help produce the most favorable outcomes.