Selling Out To Your Business Partner – Tax Advantages

Many private recruitment agencies commence with two individuals. Often these types of “partnerships” are successful in the early stages but may encounter challenges as the business grows and diverges from its initial direction. Over time, and for a variety of reasons, there can be differences of opinions between the owners that can often lead to one owner wanting to buy-out the other.

When these differences cannot be resolved and one party wants to take control of the business, there are ways to structure the transaction so that the acquiring party is not required to seek external funding for the purchase. With the correct strategy, the continuing owner can use existing funds and/or future cash flow from the business to fund the transaction and at the same time, the party selling their interest can exit the business in a tax effective manner.

The above outcomes can be achieved via a number of restructure steps which make use of various tax provisions. In particular, the small business capital gains tax (CGT) concessions can be used to assist with achieving these objectives.