Selling your business: the tax on the sale figured before you sign, and the final returns after
Free tax review
Find out what we’d handle and what it costs
Thirty minutes by phone; you leave with one written price.
If you have a letter of intent or draft purchase agreement, we figure the tax on each piece of the price before you sign, then prepare the sale-year returns. The first review is free, any planning is one flat fee quoted in writing before work starts, and business returns start at $850. Based in Santa Clarita, we work with owners selling a small business in any state.
Typical situations
Do you work with owners selling a business like mine?
Yes, we take on the tax side of selling a small business: a sole proprietor selling equipment and a customer list, S corporation owners weighing an asset sale against selling their shares, a partner being bought out, a sale paid over time, a deal with a non-compete and a consulting agreement, and closing the business after the sale.
A sole proprietor selling trucks, equipment and a customer list
A contractor or landscaper selling the trade brings the letter of intent, the draft purchase agreement and its allocation schedule (how the price is split across what’s sold), the depreciation schedules on the prior returns, and the vehicle titles. Equipment written off in full the year it was bought has no basis (the starting value a gain is measured from) left, so its share of the price is mostly or all ordinary income — and it pays to know that while the split is still a draft. We reconstruct the depreciation from the prior returns, federal and state, and figure what each piece of the price does to your tax before the agreement is signed. Here is how we work with contractors. Self-employed returns start at $650.
Two S corporation owners weighing an asset sale against selling their shares
The owners bring the buyer’s letter of intent, the last Form 1120-S (the S corporation return) with each owner’s Schedule K-1 (their share of the business income), and the corporation’s fixed-asset list. The buyer’s letter of intent has the company selling its equipment, inventory, customer list and name (an asset sale — selling the business’s things rather than the owners’ shares); the owners could sell their shares instead, and the gain on shares usually comes out as capital gain. If nobody figures it both ways, the owners sign a structure without knowing what each one costs them in tax. We show the tax each way; which way the deal goes is the owners’ call with their attorneys.
A partner being bought out by the other partners
The partner brings the operating agreement’s buyout terms (read for the tax points only), the partnership’s last Form 1065 (the partnership return) and the partner’s K-1, and the buyout payment schedule. If the partnership has receivables, inventory or depreciated equipment and the whole buyout is reported as capital gain, part of it is reported wrong. The share that comes from the partnership’s receivables (money customers owe the business), its inventory, and depreciation that would be taken back is ordinary income. We figure the split from the partnership’s records.
An owner being paid over time, with a seller note and an earn-out
The seller brings the promissory note (the buyer’s promise to pay over time), the earn-out terms (part of the price tied to how the business does after the sale) in the draft agreement, and the depreciation schedules. A sale paid over time can still owe tax in the first year on money not yet received: the depreciation taken back, up to the gain on each piece, is taxed in full in the year of sale, even when the buyer pays over several years. We figure what is taxed in the year of sale and set up the schedule for the rest.
A salon or restaurant owner whose deal includes a non-compete
The price covers the salon chairs or the kitchen equipment and fixtures, the buyer takes over the lease, and the owner stays on for a few months as a paid consultant. The seller brings the purchase agreement, the non-compete, the consulting agreement, and the draft allocation schedule. Pay for consulting after the sale is compensation for services, taxed when it’s received. It is not part of the price for the business, and when the draft folds it in, the split is wrong before anyone signs — and once both sides sign, it is hard to undo. We read the agreements against the draft allocation, and what Form 8594 will ask, before you sign.
An owner closing the business after the sale
The seller brings the last payroll records and the last filed Forms 941 and 940 (the payroll returns), the EIN letter (the IRS notice that assigned the business its tax ID number), and the LLC’s or corporation’s formation papers. The IRS closes the business account only after every return is filed and paid, so a last payroll quarter left unfiled keeps it open. With employees, the last quarter’s Form 941 and the year’s Form 940 are marked final, and W-2s go out by the due date of that final Form 941. We prepare the final returns when they’re part of the quote; the dissolution itself is a legal step for the attorney.
What you’re selling
How is the sale of a business taxed?
When you sell the business’s assets rather than your shares or partnership interest, the IRS treats it as a sale of each asset, with the gain or loss on each figured separately.
Some pieces produce ordinary income (inventory and receivables, and depreciation taken back — depreciation recapture) and others capital gain, and that split is what the planning is about.
We confirm how your company is taxed — a single-member LLC that hasn’t elected to be taxed as a corporation is sold as its assets — and sort each piece of the price into ordinary income or capital gain from your fixed-asset list and prior returns. The small business stock exclusion people read about applies only to stock in a C corporation, so it doesn’t fit a sole proprietorship, an LLC taxed as a partnership or an S corporation.
The allocation
How is the purchase price split for tax?
In an asset sale, the price is split across seven classes of assets in a fixed order — the residual method — and the buyer and the seller each report that split on Form 8594 with their returns for the year of the sale.
No class except goodwill can take more than its fair market value (what it would sell for on its own); whatever is left is goodwill. A split both sides sign binds them unless the IRS finds it isn’t appropriate.
We read the draft allocation and show what it does to your tax, class by class. We don’t negotiate the split.
What you get
What do you get from a business-sale tax review?
The review gives you four things: the tax on the sale piece by piece while the agreement is still a draft, the draft split checked, the closing list for the business, and — when you hire us for them — the sale-year returns after closing.
The tax, piece by piece
What is ordinary income and what is capital gain, for the deal as drafted — and each way, when an asset sale and a sale of the shares or the interest are both on the table. The actual numbers, in order, with the reasoning written next to them.
The draft allocation checked
What the split does to your tax, class by class, while it can still change.
The closing list
The last Schedule C (where a sole proprietor reports the business) or the final Form 1120-S or 1065 with final K-1s, the final Forms 941 and 940 and W-2s, Form 966 (the corporate dissolution form) for a corporation, and the state sales-tax, payroll and entity accounts to close.
The sale-year returns
The final business return and your own, with Form 4797 (where business property sales go), Form 8594 and, if you are paid over time, Form 6252 (the installment sale form) — or the figures handed to your own preparer.
If it isn’t worth paying for, we tell you on the call and you’re done.
What we check
What do you check before you sign and before anything is filed?
Before you sign, we read the deal papers, the depreciation schedules and the last three years of business returns, the payroll and sales-tax accounts, and the entity papers.
- The buyer’s letter of intent
- The draft purchase agreement and its allocation schedule — checked class by class against fair market value
- The depreciation schedules and fixed-asset list from prior returns — checked for Section 179 taken, so the ordinary-income part of each piece is right
- The inventory count at the sale date — checked against the share of the price for inventory
- The promissory note and any earn-out terms — checked for what is taxed in the first year
- The non-compete and any consulting or employment agreement — checked against what Form 8594 asks about them
- The last Forms 941 and 940, the seller’s permit (the state registration for making taxable sales) and the last sales-tax return — checked for anything still owed before closing
- The state payroll account number — for the final state payroll return
- The LLC’s or corporation’s formation papers — to confirm how the business is taxed
California
What is different if the business is in California?
In California, five things are different: the sales-tax account and the hold on the escrow (the neutral account that holds the sale money), the final payroll filings, the $800 yearly tax until the entity is ended, the gain itself, and real estate in the deal.
- Sales tax and the escrow hold. A business with a seller’s permit closes the account when it sells, and the final sales and use tax return includes the sale of the furniture, fixtures and equipment. The buyer must hold back enough of the price until the CDTFA (California’s sales tax agency) issues a clearance — which the CDTFA says can take 60 days or more — and anything found due is withheld from what the seller receives. We check the account is current before escrow closes, so the hold doesn’t surprise you.
- Payroll. With employees, the final state payroll return, wage report and payment are due within 10 days of the sale, and the account with the EDD (California’s payroll tax agency) is closed; the buyer will ask for the EDD’s release (DE 2220) and hold money in escrow until anything owed is paid. We prepare the final payroll returns when they’re part of the quote.
- The $800 until the entity is ended. A California LLC owes $800 every year until it is cancelled, and an S corporation at least $800 until it is dissolved, whether or not it does business. It stops when the final return is filed with the Final Return box checked and the cancellation is filed with the Secretary of State within 12 months of that final return. We file the final California return with the FTB (California’s Franchise Tax Board) and tell you which Secretary of State form ends the entity; the filing itself is a legal step for your attorney.
- The gain. California taxes a capital gain like any other income, with no special rate, and because its depreciation rules differ, the California gain on business property can differ from the federal one. An S corporation that sells on payments and then stops doing business in California can be taxed on the rest of the installment gain in its final year. We figure the gain both ways and check, before the corporation is dissolved, whether the rest of the installment gain would be taxed in its final year.
- Real estate in the deal. If a building or land is part of the sale, California real estate withholding comes into it, and the seller may be able to certify an exemption on Form 593 (the real estate withholding statement) before escrow closes. We check which box the facts support; the seller signs it.
Pricing
What does tax planning for a business sale cost in 2026?
The first review is $0, self-employed returns start at $650 for one business (a sole proprietor’s or single-member LLC owner’s return), business returns start at $850 for an S corporation’s or partnership’s final return with one owner’s personal return included, and individual returns start at $350. Any planning after the free review, and each return, is a flat fee quoted in writing before we start.
What moves a quote: the entity type (sole proprietor, single-member or multi-member LLC, S corporation, partnership), how many owners there are, whether real estate is part of the deal, whether there is seller financing (you carry a note for the buyer) or an earn-out, whether the depreciation records are missing, whether payroll and sales-tax accounts have to be closed, and whether a prior year has to be fixed first. The quote is the price.
Planning review
$0 first review
- Planning after it only when there’s planning worth doing
Sole proprietor or single-member LLC
from $650
- The final Schedule C, filed with your own return
- Federal and state, with the sale forms priced into the quote
S corporation or partnership
from $850
- The final entity return with one owner’s personal return included
- Federal and state, with the sale forms priced into the quote
- See our published return prices
Depreciation work, the allocation review, an installment schedule, final payroll and sales-tax returns, and a second state are priced inside your written quote, not published here.
How it works
What happens after the free call?
The engagement letter goes out during the free 30-minute call. Once it’s signed, we do the planning review and, if you hire us for them, the sale-year returns.
The 30-minute call
On the call: the kind of business and the entity, who the buyer is, what’s being sold, any seller financing or earn-out, a non-compete, employees, and when the sale is expected to close. It ends with one flat price for the work we’d take on.
The engagement letter
The letter has the price in it and doesn’t expire; sign when you’re ready. Signing sets up a short onboarding call, and the secure-portal invite comes from that call.
Documents
Through the secure portal: the letter of intent or draft purchase agreement and the last three years of business returns. We send a short checklist so nothing is missed.
The planning review
We read the deal papers, figure what each piece of the price and each way the deal could be structured does to your tax, check the split and any payment schedule, and list the closing filings.
The return
Half the return fee starts the work, and the balance is due before e-file. You see the return before it’s filed.
Communication
You’ll know where the planning and the returns stand.
The person who answers the phone is on the same team that figures the tax on your sale and prepares the returns.
The same-day rule
Call or email during business hours and you’ll hear back the same day — all twelve months.
Whether you’ve signed or not
Signed already, or still weighing the buyer’s first draft — the free call ends with a straight answer on whether we’re the right fit.
Admitted to practice before the IRS
Our team of IRS representation specialists is admitted to practice before the IRS. If an IRS letter shows up about the sale or the final returns, forward it: how we handle IRS letters.
The N&T Tax & Advisory Group team
For an owner selling a small business, one team handles the planning review and the sale-year returns.
Tax planning · Tax preparation · IRS representation · Direct line: (661) 554-4495
Reviews
Rated 5.0 on Google
★★★★★ Twelve reviews, every one five stars, every one verifiable. Read all of them on Google →
"Alex helped me resolve a complicated tax situation that had been causing me a lot of stress. He was extremely knowledgeable, responsive, and efficient throughout the entire process."
Kevin B. — via Google
"Working with Alex was straightforward. I hadn't looked at my books all year, but he made my life easy and handled the whole profit and loss at the end of the year so I could get my taxes done."
Levon B. — via Google
"I came to this company with previous tax years and bookkeeping that were done incorrectly. They're very knowledgeable about what they do and help me get everything in order at a very reasonable price."
Sayra A. — via Google
Where we work
Do you work with owners selling a business outside California?
Yes — based in Santa Clarita, we work with sellers remotely in any state. Documents move through the secure portal, and we walk through the numbers by phone and screen share. If you live in another state, we prepare that state’s return too and price it into your quote.
What we don’t do
We don’t value the business or set the price, advise on deal structure, draft the purchase agreement or the non-compete, handle the dissolution, recommend brokers, represent anyone before the FTB, the CDTFA or the EDD, or give investment, financial or legal advice. When a question needs an attorney — the agreement, the non-compete, the dissolution — we tell you, and your attorney handles it.
Worth reading
What can you read before you call?
These posts are written for owners while the business is still running — how equipment write-offs work, how a multi-member LLC is taxed, and how a partnership files — and each one covers ground that comes up again in a sale.
Contractor Equipment Depreciation: Expensing vs. Depreciating That New Machine in 2026
Partnerships: how your share of the business is taxedYou Brought On a Partner — Here’s How Multi-Member LLC Taxes Work in 2026
Form 1065: how the partnership return and K-1s are filedHow to File Taxes for an LLC Partnership: Form 1065, K-1s, and the March 15 Deadline
FAQ
Business sale tax questions
Do I pay tax on the whole price when I sell my business?
No — you pay tax on the gain, not the price. Each piece of the price is measured against that asset’s basis (what you paid, minus the write-offs already taken), so equipment you already wrote off carries little or no basis, and inventory is measured against what it cost. Some of the gain is ordinary income and some can be capital gain. We figure the gain on each piece from your records.
Is it better to sell the assets or my shares?
That choice belongs to you and your attorney — the tax differs by path. Selling the assets means each piece is taxed on its own; selling S corporation shares usually produces a capital gain; and part of a partner’s buyout — the share from receivables, inventory and depreciation — is ordinary income. We put the tax for each path on paper while the terms are still drafts.
What is Form 8594, and do I have to file it?
Form 8594 is the asset acquisition statement, and in an asset sale both the buyer and the seller file it with the return for the year the sale closes. It shows how the price was divided among the seven classes of assets. If the price changes later — an earn-out payment or an adjustment — a supplemental form goes in. We prepare it from the allocation in the signed agreement.
Can I spread the tax if the buyer pays me over time?
Partly: the gain can be reported as the payments arrive, except the depreciation taken back, which is taxed in full in the year of the sale, and inventory and receivables, which can’t be spread. You can also choose to report the whole gain in the year of the sale. We set up the schedule on Form 6252 and prepare it each year until the last payment.
What do I have to file to close my business after I sell it?
You file a last Schedule C with your own return, or a final Form 1120-S or Form 1065 with the final return box checked and final K-1s to the owners. In an asset sale, add Form 4797, where business property sales go, and Form 8594 for the allocation; with employees, the final payroll returns and W-2s. A corporation whose owners adopt a plan to dissolve it also files Form 966, the corporate dissolution form, within 30 days. We prepare the closing filings listed in your quote.
Is it too late to plan if I already signed?
Not for the returns, though the allocation and the payment terms were set at signing. The sale-year returns still need Form 8594 filed from the signed allocation, a payment schedule set up if the buyer pays over time, and the final returns filed. If a prior year has to be fixed first, that is priced in the quote. We start from the signed agreement and its allocation schedule.
Want to know what you’ll keep from the sale?
One free 30-minute call. You’ll leave knowing what we’d handle and what it costs — whether or not you hire us.
Rather talk now? Call (661) 554-4495 — reach us during business hours and you’ll hear back the same day.
Our team of IRS representation specialists is admitted to practice before the IRS. This page is general information, not tax advice for your specific situation.