Tag: smart investing

3 posts

Your business is your baby.  You’ve sacrificed for years, nurtured, endured sleepless nights and now it’s time to sell your business.  This means income…and income means…well, taxes.   

The tax side of selling a business has many moving parts, and if you get nothing from this article…remember this!  ALWAYS consult a tax or financial advisor.   

Here are four tax-related issues to keep in mind… 

  1. Are sales proceeds taxes as ordinary income or capital gains? 
  2. Is the sale assets or stock? 
  3. All cash deal or payment installments? 
  4. Can sale be treated as tax-free merger? 

 Remember these issues are relevant for federal income taxes…different states have different rules and may collect more or less taxes than the IRS on the same deal. 

How Are Business Sales Taxed? 

The IRS, with few exceptions, treat the business as individual assets, not one big sale.   

Those assets will be put into two buckets 

  1. Long-term capital gains (real or depreciable property) 
  2. Short-term capital gains at ordinary income rates (A/R and inventory) 


Pro Tip #1:  Plan +2 years ahead of selling your business to reduce ordinary income tax 

If you sell an asset that you’ve held for more than 12 months, the proceeds will be treated as long-term capital gains. The maximum tax rate for most taxpayers is 15%, with the maximum rate at 20%. Proceeds treated as ordinary income are taxed at the taxpayer’s individual rate. Currently the top individual federal income tax rate is 37% more than twice as high as the long-term capital gains tax rate. 

Asset Allocation 

Obviously, sellers will want most of their assets treated as long term capital gains.  However, most times, during negotiations, the buyer may want a different allocation, that in turn, can reduce the new owner’s tax bill.   

Pro Tip #2: Negotiate on sales price, to receive a more favorable asset allocation  

It’s a potential conflict, as the buyer often wants as much of the price as possible allocated to costs that can be deducted or assets that depreciate. 

For instance, the IRS says that selling inventory produces ordinary income.  But selling capital assets held for more than a year creates a long-term capital gain. 

Deal Structure 

In addition to asset allocation, the deal’s structure can affect the tax bill. If the seller agrees to take the price in installments, for instance, they can defer paying taxes until the payments are received. 

Pro Tip #3: Buyer competent?  Doing your due diligence can spread out your tax bill 

Buyers may end up paying more when they don’t have to pay everything upfront. And the seller may also be able to charge interest, in addition to saving on taxes.  Installment sales do add more risk, though, because the new owner must run the business well enough to produce profits to make payments. 

Corporate Stock Sales 

Sales of sole proprietorships, partnerships, and LLC’s are commonly treated as sales of separate assets.  However, when a corporation is sold the deal can be presented as a stock sale rather than a sale of assets.  This is important because if the corporation sells its assets, sale proceeds will be taxed twice. 

  1.  When the corporation pays taxes and… 
  2. Again, when its shareholders file individual returns 

In contrast, a stock sale gets taxed once, saving on taxes for the seller. 

Tax-Free Corporate Mergers 

If one corporation is buying another corporation, the deal can be done by exchanging strictly stock. Under the right circumstances, this can mean no taxes at all, as long as no cash is involved. 

The Bottom Line 

No matter the size of your business, consult a financial and tax advisor as taxes can eat into the cash you were hoping to get out of your business.  All this is governed by a complex set of IRS rules, which may not always be straight-forward.    



As major investment firms promote their virtuous investments that maximize societal value, while seemingly scrapping their goal of maximizing shareholder value…one must ask:  Is woke capital truly committed and capable of delivering on its heroic quest, or is it simply pandering to social progressivism for profits and PR? 


We live in a day where the undercurrent of mistrust towards institutions is at an all-time high.  Whether it is Wall Street, the Government, or Hollywood…everyone has an agenda, and pointing fingers seem to be the solution for a problem as vague as the umbrella of solutions offered.  Elevated as the root cause that threatens all of humanity’s prosperity…man created climate change…and the fuel propelling us off this cliff of human apocalypse…fossil fuels?!? 


Poverty & Human Development 

It is hard to argue, since the dawn of humanity, that no other energy source has plucked humanity from abject poverty to the precipice of human flourishing, development, and into enlightenment as fossils fuels have.  It has afforded our society the luxury to focus on values that are non-survival related and have enabled more progressive focus on values of equality, social justice, and environmental stewardship.  But tell that to almost half of the world that lacks such luxuries and would kill to enjoy a fraction of America’s energy abundance, and the 1st world values that come with them.   

Countries like Indonesia are moving away from clean energy projects. Credit: Getty Images


Rising energy consumption is tightly correlated with rising income and living standards, historically lifting humanity into the modern world.  Access to cheaper forms of energy is the necessary steppingstone for proper human development, and not a process that should be skipped with more modern expensive options.  


Humanity has flourished over the past two centuries with the average life expectancy increasing from 30 to 70 years, due to the use of machines (technology) coupled with the harnessing of energy (mainly fossil fuels) with these technologies.  But linking historical human development with environmental risk requires a more targeted approach.  Humans suffer from far more immediate local environmental risks, such as indoor air pollution, water pollution and water-borne illnesses, and malnourishment than more long term global environmental risks, such as climate change, ozone depletion, and ocean acidification. 


Over the decades, investment into business, specifically energy and energy technologies, has been a worthy, sustainable, and profitable endeavor whose local impacts can be certainly verified.  In particular, the vision, commitment, innovation, and sacrifice of the fossil fuel industry and the millions of talented employees, has been the irreplaceable and beneficial engine of progress for America.  Doing far more good than harm.  Thus, it is unjust to poorly treat and vilify an industry of people that do not deserve such ire.  Just imagine where the world would be without fossil fuels! 

Two possible agendas can explain¬†this¬†demonization and¬†woke¬†capital¬†mindset.¬†¬† First,¬†to deflect the¬†public‚Äôs¬†perception¬†of Wall Street¬†greed¬†(power and control)¬†and¬†poor¬†performance,¬†it is¬†much easier to¬†use¬†a¬†popular¬†cover¬†narrative¬†(climate change)¬†and¬†perpetrator¬†(fossil fuels)¬†than to¬†accept responsibility.¬†¬†And why not,¬†when doing¬†so¬†additionally¬†elevates¬†your status and¬†virtuousness.¬† Second,¬†distracting¬†an investor¬†from¬†reality¬†is profitable‚Ķand¬†words¬†like¬†‚Äúsustainability‚ÄĚ and ‚ÄúESG‚Ä̬†and¬†phrases¬†like ‚Äúsaving the planet‚Ä̬†are powerful¬†images¬†and¬†again‚Ķprofitable.¬†


Economy & Investment 

Recently the behemoth investment firm, BlackRock, which manages $7 trillion in assets,¬†committed to a multitude of ESG initiatives including substantially increasing its so-called ESG funds, pushing clients to adhere to the UN‚Äôs Sustainable Development Goals, and aligning itself with ‚ÄúClimate Action 100+‚ÄĚ aimed¬†at¬†improving business strategy with the goals of the Paris Agreement. ESG investing¬†today is estimated at over $20 trillion in AUM or¬†¬ľ¬†of all professionally managed assets globally.¬†¬†¬†


If¬†BlackRock and its sustainability-allies are true¬†virtuous¬†climate¬†believers,¬†why then has it been expanding its¬†firms‚Äô¬†holdings in serial polluting¬†Chinese investments?¬†¬†As a result,¬†millions of untold¬†investors, through¬†asset managers and their ESG vehicles¬†are¬†helping fund¬†and strengthen the Chinese Communist Party (CCP), and their¬†atrocious record of human rights violations and increasing¬†polluting policies.¬†¬†Shifting¬†this ‚Äúnew standard for investing‚Ä̬†reeks¬†of¬†hypocrisy,¬†misleading¬†shareholder¬†stewardship,¬†and¬†disingenuous profiteering.¬†


Trends show energy consumption will continue to rise globally in the 21st century.  Modern economies are becoming less materially intensive and more service and knowledge focused, while economy growth rates exceed slower environmental impact rates.  In part, fueled by the cyclical effect of affordable fuels and technologies that enable reducing environmental impact in the first place.  This decoupling effect of human development from the environmental impacts is predicated on more efficient human activity driven by energy, technology, and demographic trends, like urbanization of the planet…not unproven investment theory based on poor scientific, economic, and societal history. 


How can the woke sophisticates in the financial services world and beyond who knowingly underwrite China, and other implied nefarious companies, claim to be genuine progressive ESG loyalists, let alone proponents of justice of any kind? 


Energy & Natural resources 

The history of harnessing energy through technologies is an intertwined dance between the patient process of human activity, fueled by economic investment, but relative to the increasing ability to use natural resources more efficiently.  Americans should know this better than anyone.  The history of harnessing natural resources in this way has afforded America these current modern energy opportunities.  Again, one cannot simply skip steps on its way to maximizing human activity.  Diversifying investment products should favor those with the most eco/cost efficient solutions, relative to the specific stage in that localized process.  Understanding that applying a general global policy to local ecosystems, does not protect the very natural resources they aim to address.  Ordering targeted solutions for energy sources should favor the benefits to human development first, then focus on efficiency of those waste streams and use of natural resources. 


But to suggest that the idea of sustainability investments is the only conceivable path forward, is to infer that historical ones were not.  Not true.  Moreover, little evidence exists that human population and economic expansion will outpace the capacity to grow food or procure critical material resources in the foreseeable future.  And ironically, all modern so called renewable energy is truly neither renewable nor sustainable.  All require exploiting natural resources and underlying technologies.   


This sleight of hand woke capital is trying to pull off is fundamentally nothing more than an attempt to profit and take control of an energy transition.  But victoriously parading around their own virtue and value is good marketing…even though it may be hard to swallow.  Modern so-called sustainable options are simply not affordable…yet…nor remotely as efficient and helpful as advertised.   



For this purpose, let us not pretend that demonizing an undeserved industry, while wrapping itself in the virtuous robe of climate change, is in of itself noble or accomplishes something that it has not done in the first place.  In the last few decades, humanity has seen exponential progress towards once unfathomable human development.  As a proponent of the oil and gas industry, supporting a diversified, efficient, and agnostic energy policy is the most complete historical and economic investment strategy.  Insofar as it uses natural resources efficiently, reduces poverty and increases modern living standards, and progressively balances capital/energy/labor economically, the virtue of investment and economic stewardship should be judged on what it has done and what it continues to do.  Throwing the baby out with the bath water solely on the perceived merits of perception or progressivism is neither responsible nor woke.  Efficient reduction of monetary and environmental waste has and will continue to propel humanity towards the summit of prosperity.  Only then can the luxury of progressive societal values truly permeate humanity as a whole and transform our planet, our ability to steward, and ourselves.  



‚Äú‚Ķbut in this world, nothing can be said to be certain, except death and taxes‚ÄĚ. What Benjamin Franklin was suggesting regarding tax, is as old as civilization itself. Take a long gaze back into history, and inevitability staring back at you is the long imposing face of the tax man. From every war, to every ruler, to the birth of Jesus himself; looking at history through this lens may shape the way we think, and feel, about ourselves and the cultures, as we understand them today.


Historically, tax is power to rule and affect human behavior. Limit that power and the effects on that behavior have massive implications.


Take the window tax, introduced by King William III, in England during the 18th and 19thcenturies. It was designed to impose tax relative to prosperity; the more windows you had, the more prosperous you probably were.

These simple property taxes resulted in changes to the daily lives for millions of Britons. Working conditions, architecture, and physical and/or mental health standards radically changed while folks developed ways to avoid the governments long arm into their pockets.


The American revolution, at its core, was a revolt over the oppressive taxation of the people. ‚ÄúNo taxation without representation‚ÄĚ was the cry. Every conflict from Iraq to the Roman empire was made possible by various taxes in some form.


The modern world today enjoys some of the highest tax rates in history with the average American paying 35% in taxes (UK 45% and France an astounding 55%). As a result, navigating the U.S. tax code has turned into an Olympic gymnastics event. So, what are we to do? If history is any indication, we will do what humans have always done‚Ķconform for ‚Äúthe betterment of society‚ÄĚ or contort around and away from the long arm of the tax man.


– Invito Energy Partners