Selling a business - cash and stock options

rlb28

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4:11p, 1/31/24

AG

I will obviously consult a tax attorney, but just wanted a quick answer if someone knows.

Let's say a business is sold to a large entity and you are offered cash and stock options. Are the stock options taxed just like the cash?

birdman

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4:31p, 1/31/24

Generally.

And they are taxed on price when you receive them. If you have a 90 day window and stock tanks before you are allowed to sell, too bad.

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Kansas Kid

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In reply to rlb28 • 11:57a, 2/2/24

rlb28 said:
I will obviously consult a tax attorney, but just wanted a quick answer if someone knows.

Let's say a business is sold to a large entity and you are offered cash and stock options. Are the stock options taxed just like the cash?

If you have your assets in a partnership, LLC, or your individual name and take back stock in an LLC or partnership, you may be able to defer the gain on the interests received but you will need a tax and legal advisor to make sure it is done correctly. I doubt it would work if you take back stock options but I have never done that so I don't know.

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Pinochet

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12:09p, 2/3/24

Whether options are considered stock is a very fact dependent question. I worked on an opinion that cost a company well over $200k to determine that there was greater than 50% chance it was. We couldn't give more comfort than that. I will also say that "stock" only exists in a corporation, so trading for partnership interest will not qualify under the 368 reorganization rules to be tax free. There may be another way but that won't do it. If it's a small company, get cash and earnouts, or get paid in actual stock to make it easier.

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