M&A
Selling a Delaware LLC: legal process and tax considerations
Selling a Delaware LLC involves member-interest transfer plus tax structuring. Here is what to expect.
Transaction structure: asset vs equity
Equity sale: buyer purchases your LLC membership interests; LLC continues with same EIN, contracts, and history. Cleaner from contract-transfer perspective; tax burden falls on seller as capital gain.
Asset sale: buyer purchases specific assets (customer list, IP, equipment); LLC continues with you but assets transferred. Often better for buyer (step-up in basis); often worse for seller (ordinary income in some categories).
Due diligence
Buyer typically reviews: financial statements (3-5 years), tax returns, customer contracts, IP ownership documentation, employee/contractor records, regulatory compliance (BOI report current, franchise tax current, foreign-qualifications). Allow 4-8 weeks for due diligence.
Issues frequently identified: incomplete contract assignments, IP gaps (work-for-hire missing), tax compliance gaps.
Tax considerations
For non-resident seller: capital gain on US LLC sale is generally not US-taxed unless the LLC has US real-estate assets (FIRPTA). However, home-country tax may apply on the gain.
Engage US tax attorney to confirm FIRPTA and any state-tax exposure before signing.
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