Ask most business owners what they want from a sale, and you’ll hear one word: price.
But the truth? Two sellers can both sell for $2 million—yet one walks away with significantly more than the other.
The difference often comes down to deal structure and tax planning. Here’s how to make sure your deal protects not just the number on paper—but what you actually keep.
Asset Sale vs. Stock Sale: Know the Difference
Most small business transactions are structured as asset sales, where you’re selling the business’s assets—not the legal entity itself. In certain situations, like C-corps or license-heavy businesses, a stock sale might be considered instead.
| Aspect | Asset Sale | Stock Sale |
|---|---|---|
| What the buyer gets | Assets only (equipment, inventory, contracts) | Ownership of the entire entity |
| Seller tax impact | Often a mix of ordinary income and capital gains | Typically taxed as capital gains (varies by case) |
| Buyer preference | More control over what’s included | Simpler licensing or entity continuity |
Note: Every business is different. S-corp owners may prefer stock sales, but most buyers favor asset deals unless there’s a compelling reason otherwise. Always review options with your CPA or legal counsel.
Cash, Notes, and Earn-Outs: Structuring the Payout
Buyers rarely pay 100% in cash at closing. A deal might include:
- Cash at Close – Paid immediately at closing
- Seller Note – A loan you extend to the buyer, repaid over time
- Earn-Out – Future payments tied to the business’s post-sale performance
| Structure | Pros | Considerations |
|---|---|---|
| More cash upfront | Clean and simple | Often a lower total price |
| Seller note | Adds value, earns interest | Risk if buyer performance declines |
| Earn-out | Rewards future growth | Depends on how targets are defined and enforced |
Tip: Be sure you understand how earn-outs are calculated—and what happens if targets aren’t met.
Financing: How the Buyer Pays Impacts the Deal
| Buyer Financing | What It Could Mean for You |
|---|---|
| SBA loan | May cover up to 90% of the purchase; slower but higher cash at closing |
| Conventional bank | Common for larger deals; fewer SBA restrictions |
| Cash / self-funded | Faster close; may ask for pricing flexibility |
Working Capital Peg: Don’t Let This Catch You Off Guard
In many deals, buyers expect a “normal” level of working capital—enough cash, receivables, and inventory to keep operations running.
If the working capital you leave is below expectations, the buyer may reduce the purchase price. If it’s more, you might not be compensated—unless clearly defined in advance.
Tip: Define and agree on a working capital target early, and consult your advisor to model the impact.
Tax Considerations: Consult Your CPA Early
We don’t provide tax advice, but we strongly encourage every seller to involve their CPA or tax advisor before accepting any offer. A few planning steps can help avoid surprises at closing.
Things your CPA may help you evaluate:
- Installment sale treatment (spreading gains over time)
- C-corp vs. S-corp implications
- Allocation of purchase price among assets
- Estimated tax impact based on deal structure
Bottom line: Tax treatment varies widely. Having your CPA review the structure early can make a major difference in what you keep.
Common Mistakes That Cost Sellers Money
| Mistake | Why It Hurts | How to Prevent It |
|---|---|---|
| Focusing only on price | High price with poor terms = lower net | Model net proceeds, not just top-line |
| Signing LOI without tax review | May lock you into unfavorable terms | Have your CPA review the offer first |
| Ignoring working capital terms | Can lead to last-minute price reductions | Define expectations up front |
| Overestimating earn-out potential | Creates future disappointment | Push for clarity and minimum guarantees |
How LevelStar Helps Protect What You’ve Built
- Compare real-world deal structures—not just averages
- Coordinate with your CPA, financial advisor and attorney.
- Negotiate seller notes and earn-outs with clear terms
- Help define working capital expectations to reduce friction
“Your deal isn’t just about price—it’s about structure, clarity, and maximizing what you keep.”
Ready to See How Deal Structure Impacts Your Outcome?
Our complimentary strategy session includes:
- Net proceeds modeling (based on your financials and goals)
- Structure guidance: cash, seller financing, earn-outs, and more
- CPA coordination to help prevent surprises at closing
Selling your business is your reward. Let’s make sure the structure reflects that.