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Old 06-22-2016, 12:16 PM
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Selling Business That's Been Closed - How to Report?

Hello,
I closed my small sole proprietorship business two years ago. I have recently been contacted by someone who wants to buy it. Since it's been closed so long and no longer registered, I'm wondering how I would categorize this with the IRS. If the sale goes through, would the payment be self-employment income and taxed the 15.3% or is there another way to claim the money I'm paid?

There are no real raw materials or equipment left of the business. What I would be selling are recipes, branding, customer list, etc. In addition, I will be hired as a consultant to teach my production process. For the consulting, I'm sure that's self-employment income. I'm just hoping there's some way to report the income from the sale of the business without having to pay that 15.3%.

Any ideas?



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Old 06-22-2016, 03:21 PM
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Join Date: Oct 2010
Posts: 4,835
Quote:
Originally Posted by abycats View Post
Hello,
I closed my small sole proprietorship business two years ago. I have recently been contacted by someone who wants to buy it. Since it's been closed so long and no longer registered, I'm wondering how I would categorize this with the IRS. If the sale goes through, would the payment be self-employment income and taxed the 15.3% or is there another way to claim the money I'm paid?

There are no real raw materials or equipment left of the business. What I would be selling are recipes, branding, customer list, etc. In addition, I will be hired as a consultant to teach my production process. For the consulting, I'm sure that's self-employment income. I'm just hoping there's some way to report the income from the sale of the business without having to pay that 15.3%.

Any ideas?
I closed my small sole proprietorship business two years ago. I have recently been contacted by someone who wants to buy it. Since it's been closed so long and no longer registered, I'm wondering how I would categorize this with the IRS. If the sale goes through, would the payment be self-employment income and taxed the 15.3% or is there another way to claim the money I'm paid?======>>>>>>>>>>as you can see, you do not need to file tax unless the amount on SCh C of 1040 line 29 / 31 is $400 or exceeds $400.By the same token, you also do not need to pay SECA tax UNLESS the amount on Sch SE of 1040 line 2 / 3 is $400 or exceeds $400. So you just need to pay on the difference between the sale price and the original cost of the closed SP. You will be taxed on the profit you make from selling the business;needless to say REMEMEBR: The amount of tax that you will ultimately have to pay depends upon whether the money you make from the sale is taxed as ordinary income or capital gains. Profit received from the sale of your biz assets will most likely be taxed at capital gains rates, whereas amount you receive under a consulting agreement will be ordinary income.

There are no real raw materials or equipment left of the business. What I would be selling are recipes, branding, customer list, etc. In addition, I will be hired as a consultant to teach my production process. For the consulting, I'm sure that's self-employment income. I'm just hoping there's some way to report the income from the sale of the business without having to pay that 15.3%.=>>>>>>>>>>As mentioned previousy; aslongas the amt on your Sch SE line 2 / 3 is $400 or exceeds $400, then you must pay 15.3% of SECA tax top IRS and can claim 50% of it on page 1 of from 1040.



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