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-> Household Management
-> Finances
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amother
OP
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 Thu, Nov 10 2022, 7:22 pm
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If I paid $100k to start a business (along with a partner who paid 100k), we both made back our investment as well as more profit over the years - if we then sell for $400k (we each make 200k) what do I pay taxes on? All 200 or just the 100 above the price I paid to start the business?
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amother
Lightcyan
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Thu, Nov 10 2022, 7:30 pm
Sales price - initial investment - gains + losses + all money taken out of the company (not salary) = capital gain.
Your pay capital gains tax on your capital gain.
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amother
OP
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Thu, Nov 10 2022, 7:40 pm
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All money taken out of the company when? We already paid taxes on money taken out during the years before the sale
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amother
Silver
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Fri, Nov 11 2022, 12:05 am
You should speak to an accountant.
But the basic idea is this: you pay capital gain tax (lower rate than income tax) on the profit of the sale.
What's the profit? The amount more than your stake in the company.
For illustration:
(Assuming a pass through entity, like schedule c or partnership or s corp)
You invest $100k - your value/equity/basis is $100k.
The business makes $50k profit. You pay income tax on this. Your value is $150k.
You take out $30k. You don't pay income tax on this. Your value is $120k.
The business has a 10k loss. This reduces your income tax bill. Your value is $110.
The business makes $40k profit. Your value is $150k.
If you sell for $200k at this point, your capital gain is $50k.
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amother
OP
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Fri, Nov 11 2022, 7:42 am
| amother Silver wrote: | You should speak to an accountant.
But the basic idea is this: you pay capital gain tax (lower rate than income tax) on the profit of the sale.
What's the profit? The amount more than your stake in the company.
For illustration:
(Assuming a pass through entity, like schedule c or partnership or s corp)
You invest $100k - your value/equity/basis is $100k.
The business makes $50k profit. You pay income tax on this. Your value is $150k.
You take out $30k. You don't pay income tax on this. Your value is $120k.
The business has a 10k loss. This reduces your income tax bill. Your value is $110.
The business makes $40k profit. Your value is $150k.
If you sell for $200k at this point, your capital gain is $50k. |
And are there taxes paid on the 150?
It’s an LLC.
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