Avoiding state taxes on the sale of a business
Avoiding state taxes on the sale of a business: In this episode of Ask The Hammer, Jeffrey talks about how to potentially avoid state taxes on the sale of a small business.
Key Takeaways
- A Domestic Asset Protection Trust (DAT) is a self-settled trust where you transfer your own property but retain usage rights; not every state offers them, and effectiveness varies by your state of residence
- Many states will tax DAT assets as if they're still your income if you're a state resident, completely negating the tax avoidance strategy—know your home state's specific rules before implementing
- Avoid connecting your LLC and trust to multiple different states, as this exposes you to different states' tax laws and creates tax liability risks in each state where you have connections
- Keep your LLC and trust in the same state, or consider relocating your business to a state with favorable tax rules, to minimize multi-state tax exposure
- Hire both a knowledgeable trust attorney AND a business attorney (or a firm with expertise in both areas) to properly structure an LLC-to-trust arrangement for a business sale
Avoiding state taxes on the sale of a business: In this episode of Ask The Hammer, Jeffrey talks about how to potentially avoid state taxes on the sale of a small business. For more free videos to help you with tax planning, please visit the finStream Tax Planning Center at this link: https://www.finstream.tv/videos/tax-planning/
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