Where tax shapes the deal
Buyers often prefer asset purchases because they can usually depreciate or amortize what they acquire, while sellers often prefer selling shares for tax reasons of their own. How the purchase price is allocated among assets can matter to both, and inconsistent allocations invite questions from the IRS. Real estate in New York can bring state and city transfer taxes into the calculation. Earn-outs, rollover equity, and deferred payments each raise timing questions. Sellers who own the business through a pass-through entity face different questions than owners of a C corporation, so the entity type is one of the first facts we confirm. Treating tax as a closing-week issue tends to leave value on the table.
Diligence on the target's tax history
In a stock deal, the buyer usually inherits the company's tax history along with the company. Diligence typically reviews income tax returns, sales and payroll tax compliance, state filing obligations, and any open audits or notices. Sales tax owed in states where the target had customers but never registered is a frequent surprise, as are worker classification problems. The findings feed into the purchase agreement through representations, indemnities, escrows, or price adjustments. Keep a log of what was requested, what was provided, and what remains open.
Bringing advice in at the right time
Tax input is most useful before the letter of intent is signed, while the structure is still flexible. Our first look covers the parties, the form of the business, the proposed structure, and any timing constraints. We consider whether alternatives, such as a tax-free reorganization or an election treating a stock purchase as an asset purchase, may be available and worth discussing. We also separate the questions that belong with your accountant from those that involve legal drafting. From there, the tax terms can be negotiated alongside everything else.
