If you’re considering buying a business, it may include some valuable intangible assets. Examples include proprietary software, customer lists, and goodwill.
This article tells you what you need to know about the tax implications of buying a business with intangibles. But first, let’s cover some necessary background information.
Business Purchase Alternatives
You automatically make a tax law asset purchase if you buy a sole proprietorship or a single-member LLC taxed as a proprietorship. That’s because under tax law, the proprietor or the single-member LLC owner taxed as a proprietor owns all the business assets, and you—or your business entity—buy them directly from the owner.
You can also arrange an asset purchase deal for a business that has been operated as a corporation, a partnership, or a multi-member LLC that is treated as a partnership for tax purposes. In this scenario, the existing business owner (the seller) would generally prefer to sell his or her ownership interest rather than the business assets for two reasons:
Selling an ownership interest generally divorces the seller from any ... Log in to view full article.