With Congress’ ongoing discussions about the federal budget, there could be significant changes to the tax code, possibly including increases in capital gains tax rates. If significant changes to the capital gains tax move forward, you may think 2021 is the right time to sell a portion of your portfolio.
Other factors to consider regarding a business sale
There is no specific time that any authority would confidently tell you is the right time to sell your business. While some moments may be more advantageous than others, ultimately, timing the market for a sale is always a risk.
That said, if you think 2021 this might be an opportune time to sell a business in your portfolio, you must consider a few points:
- Buyers: Do you know prospective buyers for your business or would you need to go through a marketing process? Marketing a business can be costly and those costs must be a part of your calculation and could outweigh any possible tax savings.
- Reinvestment: If you sell the business, do you have a plan to reinvest your net proceeds? Can you reasonably project to get as strong a return from other investments as you would expect if you keep the business and sell later?
- Valuation: How will you decide whether an offer for your business is at a reasonable price? Have you discussed with professionals how the market might determine a price for your business?
Additionally, while you prepare to sell the business, you will be under greater scrutiny as your prospective buyers conduct due diligence on your operations, finances, history and other concerns.
Business sales of significant size come with considerable complexity
Any business sale is complex by its nature, but selling a sizeable, profitable business will be an order of magnitude greater in complexity. Deciding to sell a large piece of your portfolio is not something to do on a whim. However, with legal advice from a firm familiar with large commercial M&A deals, you can move forward with confidence.