It may sound crazy, but you need to start planning for your business' death while you're setting it up. It's not like drafting a will in the 9th grade, or buying cleats for your son the night he's born. Planning for the demise of your business in the initial set-up is pretty important and not nearly as crazy as those cleats.
I'm not talking about deciding whether to sell the business' assets or its stock (in the corporate world) or whether to sell your membership interests to someone else (in the LLC world). I'm referring to the tax outcomes....real dollars....what you may have to pay when you decide to get out. What are you really selling? How are you taxed as a result of the transactions?
For example, in the C-Corporation world, when you sell the business' assets to a willing buyer, you could be paying taxes twice. You could be paying taxes as a result of the asset sale, then you could be subject to taxes on any distribution that is paid out as the corporation's bank accounts are closed and business is wound down. In the S-Corporation world, that isn't necessarily the case. In both the S-Corporation and C-Corporation, if you sell your stock and not your assets, then the transaction is taxed differently. If you have an LLC taxed as a partnership, and you are in the real estate rental business, you could decide that you want to do something different but you'd like to take one of those properties for your own. Can you do that and avoid burdensome taxation?
Tax structure matters when selling your business, since that structure could dictate the tax implications that await you. You worked really hard to build it, so don't plan foolishly for the business' end by choosing a less-than-advantageous tax structure.
