IRA Financial Blog

Two Secret Ways to Sell a Business Tax Free – Episode 398

Adam Talks

In today’s episode of Adam Talks, Adam Bergman, Esq. discusses two ways (using a Roth retirement plan or the ROBS solution) you can sell a business you own and not pay taxes.

Two Unknown Ways to Sell a Business Tax Free

Adam Bergman discusses two unknown ways to sell a business tax free. The first scenario involves using a Roth IRA, which allows for the sheltering of all income and gains from taxes. To qualify, the individual must be over 59 and a half years old and have had the Roth IRA open for at least five years. The gains from the sale of stock or LLC interest can be considered a capital gains transaction, which can go to the Roth IRA with no tax implications. Additionally, even if the individual is under 50 years old, the money will still go to the Roth IRA tax-free, allowing for reinvestment in other types of investments.

The second scenario involves owning less than 50% of the business, either through an IRA or Roth IRA. By utilizing a Roth IRA and meeting the necessary requirements, it is possible to sell a business without tax. Owning less than 50% of the business and structuring the transaction correctly can help individuals benefit from capital gains and shelter their income from taxes. Starting the business with the Roth IRA as an initial investor is advantageous for securing a low valuation. It is also important to consider the potential UBIT if the Roth IRA invests in a passive entity like an LLC.

Bergman also discusses the concept of ROBS (Rollovers for Business Startups) as a way to shelter gains in a business. If an individual owns more than 50% of a business and wants to be actively involved, the Roth IRA scenario won’t work due to prohibited transactions rules. The ROBS solution involves setting up a C Corp and a 401(k) plan. This allows individuals to use retirement money without tax or penalties and gain tax-free proceeds when selling the business. However, there are downsides to the ROBS structure, such as the 21% corporate tax and the requirement to offer 401(k) benefits to employees.

The importance of education and planning is emphasized throughout the podcast. Bergman emphasizes the need for knowledge before starting a business and highlight the advantages of starting a business in America. He also stresses the significance of investing early and planning ahead to take advantage of tax-free growth strategies like the Roth IRA. Bergman aims to educate and impact hundreds of thousands of people each week through his podcasts and videos.

In conclusion, Mr. Bergman provides insights into two unknown ways to sell a business tax-free: utilizing a Roth IRA and owning less than 50% of the business, or using the ROBS structure if actively involved. Education, planning, and starting a business with low valuation are crucial elements in achieving financial success and sheltering gains from taxes. He believe in the effectiveness of the approach, based on mathematical principles and tax-free growth, and encourage audience engagement and subscription to his content.

To learn more more about how to sell a business tax free, be sure to listen to this week’s episode.


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