How Much Will I Keep After Selling My Business?

Most sellers fixate on the sale price. That is the wrong number.

What actually matters is the amount that hits your bank account after federal taxes, state taxes, the seller note, and deal costs are all settled. For most business owners, that figure lands somewhere between 60% and 80% of the gross purchase price. Sometimes lower, depending on how the deal is structured and where you live.

Not a reason to panic. But it is a reason to understand the math before you sign an LOI.

What Actually Happens to Your Sale Proceeds

The number on an LOI is not your take-home pay. It is a starting point. A series of deductions sit between that number and what you actually keep, and most sellers do not fully account for them until they are already deep in the process.

Here is the rough order of operations on a $1.5M sale:

The gross purchase price ($1.5M in this example)
Minus the seller note amount (often 5% to 20% of the purchase price, deferred for up to 10 years on SBA deals)
Minus deal costs like broker commissions, attorney fees, and escrow
Minus federal capital gains tax on the taxable portion
Minus state income or capital gains tax
What remains is your net cash at close

On a $1.5M deal, walking away with $900K to $1.1M in cash at close is a common outcome. The seller note adds another $75K to $300K, but that money comes to you over time. Not at closing.

The Tax Structure: Asset Sale vs. Stock Sale

How the deal is structured determines how your proceeds get taxed. This is where the biggest swings happen, and where most sellers leave money on the table without realizing it.

The vast majority of small business acquisitions are structured as asset sales. Buyers prefer them because they get a stepped-up basis on the assets, which generates better depreciation and tax treatment on their end. For you as the seller, the picture is more complicated because the purchase price gets allocated across different asset classes, and each class carries its own tax treatment.

In an asset sale, different portions of the price get taxed differently:

Tangible assets like equipment and inventory are often taxed as ordinary income where depreciation recapture is involved
Goodwill is typically taxed at long-term capital gains rates if you have owned the business for more than a year
Non-compete agreements are taxed as ordinary income

So your effective tax rate on the sale is a blended rate, not a flat number. Part of it gets hit at capital gains rates (15% to 20% federal for most sellers), and part gets hit at ordinary income rates (up to 37% federal). The allocation between those buckets is negotiable, which is something a lot of sellers do not realize until after the purchase agreement is signed.

A stock sale simplifies the picture. The entire purchase price is generally taxed as capital gains. Buyers typically resist stock sales because they lose the stepped-up basis, but you may be able to negotiate one if you have significant goodwill value or legacy liabilities the buyer wants no part of. Expect to offer a price concession of 3% to 8% to get a buyer to agree.

Work with your CPA to model both structures before you settle on deal terms. The difference can be six figures on a $2M sale.

How SBA Deal Structure Affects What You Keep

Here is where a lot of sellers get surprised.

The majority of small business acquisitions in the $500K to $5M range are financed through SBA 7(a) loans, and the financing structure directly affects your proceeds in ways that are worth understanding early.

On a standard SBA deal, expect the structure to look roughly like this:

70% to 80% comes from the SBA loan (paid directly to you at close)
10% is the buyer’s equity injection (also paid to you at close)
10% to 20% is the seller note (deferred, paid to you over time)

That seller note portion is real money. It is contractually yours. But it is not cash at closing. On a $2M deal, a 15% seller note means $300K that you will receive over the term of the note rather than at the table.

And here is the part that catches people off guard: on SBA transactions, the seller note is typically placed on full standby for up to 10 years at 0% interest. That structure exists to protect the SBA loan’s debt service coverage ratio, but it also means your total proceeds are stretched over a decade. Budget accordingly.

The upside is real though. SBA-backed buyers close at a higher rate than buyers relying on conventional financing or undisclosed funding sources. The financing is structured and pre-approved before they make an offer. You are not sitting around waiting on a buyer to “figure out” how they will pay for the deal.

Federal Capital Gains Tax: The Real Numbers

For most business sellers, the gain on the sale qualifies for long-term capital gains treatment, provided you have owned the business for more than 12 months. The federal long-term capital gains rates for 2024 break down like this:

0% for taxable income below roughly $47K (single) or $94K (married filing jointly)
15% for most middle-income sellers
20% for high-income sellers with taxable income above roughly $518K single or $583K married

There is also the Net Investment Income Tax, or NIIT, of 3.8% that applies to passive investment income for sellers above certain income thresholds. Depending on how your business is structured and your level of active involvement, this may or may not apply to your sale proceeds. Your CPA needs to evaluate this specifically. Do not assume it applies or does not apply without running the numbers.

Add state capital gains or income taxes on top, and the total tax bite on the gain portion of your sale can range from 20% to 35% or more for sellers in high-tax states.

To put real numbers on it: on a $1.5M sale where $1.1M is treated as capital gains and $400K as ordinary income, a seller in California might keep $850K to $950K after taxes. A seller in Texas or Florida, with no state income tax, might keep $1M to $1.1M on the same deal. Same business, same price, different state. That is a $100K to $150K gap based purely on geography.

Deal Costs Sellers Forget to Factor In

Beyond taxes, three costs routinely blindside sellers.

Broker commissions. If you listed with a business broker, typical commissions run 8% to 12% on deals under $1M, and 5% to 8% on deals in the $1M to $5M range. On a $1.5M deal at 6%, that is $90K off the top before anyone counts a single dollar in taxes.

Attorney fees. A quality M&A attorney charges $10K to $30K to represent you through due diligence, purchase agreement negotiation, and closing. Do not skip this. Trying to save on attorney fees during a million-dollar transaction is the wrong place to cut corners.

Escrow holdbacks. Some deals include a post-closing escrow holdback of 5% to 10% of the purchase price, held for 6 to 18 months to cover potential indemnification claims tied to your representations and warranties. That money is technically yours, but it is not liquid at close. You cannot spend it, invest it, or plan around it until the holdback period expires.

Total deal costs, excluding taxes, often run 6% to 15% of the purchase price. Build that into your net proceeds estimate from the beginning, not as an afterthought once you are already under LOI.

So that covers what comes out of your proceeds. Now here is what you can actually control.

What You Can Do to Keep More

Not every dollar lost to taxes and deal costs is inevitable. There are real levers you can pull, and the time to pull them is before you list, not after you have already accepted terms.

Optimize your add-backs before listing. The more defensible your SDE or EBITDA, the higher the multiple a buyer will pay. A business with clean books and well-documented add-backs commands better pricing than one where the buyer has to discount for uncertainty. We see this constantly. Two similar businesses, same revenue, same industry, but the one with organized financials sells for a higher multiple because the buyer’s lender can underwrite it without guessing.

Negotiate the purchase price allocation. This is the single most overlooked tax planning lever in a business sale. Not all deal components are taxed equally. Pushing more of the allocation toward goodwill (capital gains treatment) and less toward non-competes and consulting agreements (ordinary income treatment) can meaningfully shift your after-tax result. This is negotiable. Your CPA should be at the table for this conversation, not reviewing it after the fact.

Consider installment sale treatment. If you receive a seller note or payments over time, you may qualify for installment sale treatment under Section 453 of the tax code, meaning you pay capital gains tax as you receive payments rather than all upfront. This can smooth your tax liability across multiple years. Run this by your CPA early.

Understand your state’s tax treatment. Some states have no capital gains tax. Some have no income tax at all. If you are close to establishing residency elsewhere, the timing of your closing date could have six-figure tax implications. This is especially relevant for sellers in California, New York, and other high-tax states.

Sell to a pre-qualified, SBA-backed buyer. This sounds self-serving coming from us, but it is also true: deals with properly structured financing close at a higher rate. A deal that falls apart four months in costs you time, confidentiality, and sometimes momentum with your own team. Working with a buyer backed by an experienced acquisition advisory team means fewer broken deals and less wasted time.

How Much Will I Keep After Selling My Business: The Short Answer

Every deal is different. But as a rough framework for what to expect:

For a business that sells for $1M to $5M through an SBA-structured deal, most sellers net somewhere between 55% and 75% of the gross purchase price in cash at closing, after deal costs and taxes. On top of that, an additional 10% to 20% is deferred through a seller note.

On a $2M sale, that translates to roughly $1.1M to $1.5M in your account at close, plus a seller note in the $200K to $400K range that pays out over time.

These are directional estimates. Your actual outcome depends on deal structure, asset allocation, your state of residence, your tax basis in the business, and whether you have a CPA who genuinely understands business sale taxation (not all of them do).

Start modeling your net proceeds early. Before you set your asking price. Not after you have already signed an LOI and the terms are locked.

Frequently Asked Questions

How much tax do I pay when I sell my business?

It depends on how the deal is structured, how the purchase price is allocated across asset classes, and your state of residence. Most sellers pay federal capital gains tax of 15% to 20% on the goodwill portion, and ordinary income tax up to 37% on components like non-compete payments and depreciation recapture. State taxes vary widely. Total tax on the gain typically runs 20% to 35%, sometimes higher in states like California or New York.

What is a seller note and how does it affect what I keep after selling my business?

A seller note is a portion of the purchase price that the buyer pays you over time rather than at closing. On SBA deals, seller notes are commonly 10% to 20% of the purchase price, placed on full standby for up to 10 years at 0% interest. The money is yours, but it is not cash at closing. You receive it as periodic payments over the note term. Factor this into your liquidity planning before you accept any deal.

Is it better to structure my sale as an asset sale or stock sale?

For most sellers, a stock sale produces better tax treatment because the entire gain is typically taxed at capital gains rates rather than a blended rate that includes ordinary income. But buyers strongly prefer asset sales. Getting a buyer to agree to a stock sale usually requires offering a price discount of 3% to 8%. Whether the tax savings outweigh that concession depends on your numbers. Run both scenarios with your CPA before negotiating.

How long does it take to receive all my money after selling a business?

If the deal includes a seller note (which most SBA deals do), you receive the bulk of your proceeds at closing and the remaining payments over the note term, which can stretch up to 10 years. If there is an escrow holdback for representations and warranties, those funds are typically released 6 to 18 months after closing once the indemnification period expires.

Do I have to pay capital gains tax on the full sale price of my business?

No. Capital gains tax applies to the gain, not the full purchase price. Your gain is the sale price minus your adjusted tax basis in the business assets. If you have a high basis (for example, you purchased the business recently or have invested significantly in depreciable assets), your taxable gain may be considerably less than the total sale price. Your CPA can calculate your adjusted basis before you go to market.

Thinking About Selling Your Business?

Regalis Capital represents serious, pre-qualified buyers who use SBA 7(a) financing to acquire businesses in the $500K to $5M range. As the seller, you pay nothing. No fees, no commissions, no obligation to us at any point.

Our buyers come to the table with financing structured and a team that has reviewed the deal before making an offer. That means fewer broken deals, fewer surprises in due diligence, and a cleaner path to closing.

If you are ready to understand what a sale could realistically look like for your business, start the conversation here.