Turning Transactions Into Opportunities: The Impact of Tax Structuring 

When it comes to buying or selling a business, the focus often falls on the headline number: the purchase price. But seasoned business owners know that the way a deal is structured for tax purposes can make as much difference as the price itself — sometimes more. 

With interest rates still elevated and tax laws continuing to evolve, transaction structuring has become a critical tool for protecting value. A well-planned approach not only reduces tax liabilities but also supports smoother negotiations, strengthens cash flow, and lays the groundwork for long-term success. 

Why Tax Structuring Matters 

The tax implications of a transaction can vary dramatically depending on how it’s set up. Key considerations include: 

• Asset Sale vs. Stock Sale 
  In an asset sale, buyers benefit from a step-up in basis, which allows for new depreciation and amortization. Sellers, however, may face higher ordinary income tax on items like depreciation recapture. By contrast, a stock sale often results in more favorable capital gains treatment for sellers, but buyers lose some of those tax advantages. 

• Installment Sales 
  Spreading payments over multiple years can lower a seller’s immediate tax burden and help smooth cash flow. However, this structure may also expose the seller to risks tied to future tax law changes or the buyer’s financial health. 

• Entity Structure 
  Whether the business is a C corporation, S corporation, partnership, or LLC directly impacts how the sale is taxed. For example, C corporations may face double taxation if transactions aren’t structured carefully, while pass-through entities can sometimes provide more flexibility. 

• Evolving Tax Rules 
  Deductions, depreciation rules, and rates shift over time. The tax strategy that worked just a few years ago may no longer be optimal, making it essential to revisit assumptions before entering a deal. 

Each of these factors carries trade-offs. Without thoughtful planning, business owners risk losing a significant portion of their hard-earned value to taxes. 

Best Practices for Business Owners 

1. Engage Advisors Early 
   Tax structuring isn’t an afterthought — it should be built into transaction planning from the start. 

2. Model Multiple Scenarios 
   Comparing the after-tax outcomes of different structures, such as asset versus stock sales or lump sum versus installment payments, helps identify the most advantageous path. 

3. Align Structure with Long-Term Goals 
   Sellers nearing retirement may prioritize liquidity and favorable tax treatment, while buyers often seek depreciation opportunities. Structuring with both perspectives in mind leads to smoother negotiations. 

4. Consider Timing 
   The timing of a transaction can influence tax outcomes, especially if rules or rates are expected to shift. Planning ahead provides flexibility. 

5. Stay Informed 
   Tax law is never static. Monitoring legislative and regulatory changes ensures your strategy remains current and effective. 

Positioning for Optimal Outcomes 

The success of a transaction isn’t measured only by the purchase price or the closing date — it’s about what remains after taxes and how the structure supports long-term objectives. In a changing tax environment, structuring deals with care is one of the most important tools business owners have to protect value. 

At Brady Martz, our Valuation, Transaction, and Transformation team helps clients navigate the complexities of tax structuring, evaluate options, and plan with confidence. With the right guidance, you can reduce risk, maximize proceeds, and turn a good deal into a great one.