Structure involves how the parties define the transaction in terms of what is being sold and how each item being sold is valued. Taxes are significantly different between a transaction where you sell the stock and one where you sell the assets.
More than anything else, the structure of the transaction determines how much tax you will pay. Your intermediary and attorney can make suggestions, however, your CPA will be filing your tax return on the transaction and he/she must be comfortable with the structure.
Some of the issues to be resolved during the structure negotiations include:
· Asset vs. stock sale
· Value of the Non-Compete Agreement
· Value of the Employment or Consulting Agreement
· Interest rates on notes
· Earnout payments for performance of company
· Value of the assets and liabilities in the company (by line item)
Define the structure of the transaction explicitly in the Letter of Intent. It has a significant impact on your take-home pay. It should not be deferred to be negotiated later with a clause such as, “The parties will work together to structure the transaction to minimize taxes.”