Allocation of Your Sales Price Matters!

And should be negotiated as part of your deal.

The rule "what's good for the seller is bad for the buyer" is true within an asset sale as well.

If you go the route of an asset sale, you and your buyer will need to allocate the total purchase price amongst all the assets involved in the sale. If you sell your business for $900K, you will need to negotiate how much of that $900K will be allocated to the equipment, how much will be allocated to the client list, how much will be allocated to the non-compete agreement, and how much will be allocated to goodwill.

And yes, what’s good for the seller here, is bad for the buyer. That’s why it needs to be part of the negotiation. This allocation will determine

• How much you pay in taxes.

• How much and how fast your buyer can write off the purchase.

• Plus, the allocation needs to be reported on the tax returns of both Buyer and Seller, so hopefully they match.

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