Business sale net proceeds calculator

How business sale proceeds are calculated

Most owners focus on the headline sale price, but the number you actually deposit is lower than that — often dramatically so. The waterfall from sale price to net-after-tax proceeds follows a predictable sequence:

1. Broker commission — typically 8–12% of sale price, paid at close.
2. Debt assumed by buyer — if the buyer assumes outstanding business debt (SBA loans, equipment financing, lines of credit), that amount reduces your gross proceeds.
3. Gross proceeds — what remains after commissions and debt. This is the number your capital gains tax is calculated on.
4. Deal structure adjustment — if you carry a seller note or agree to an earnout, only the cash at close arrives on day one. The deferred portion is received (and taxed) over time.
5. Capital gains tax — federal long-term rates (0%, 15%, or 20% depending on your income) plus state tax on the gain above your tax basis.

Tax basis and the taxable gain

Your taxable gain is the gross proceeds minus your adjusted tax basis in the business. The basis is roughly what you originally invested, plus retained earnings that were previously taxed, minus cumulative depreciation and amortization deductions you've taken. A CPA or business transaction attorney should calculate this precisely before you sign a letter of intent.

Depreciation recapture

If your business owns depreciable assets (equipment, vehicles, real property improvements), the IRS recaptures the depreciation deductions you've taken at ordinary income rates (up to 25% on real property, up to 37% on personal property via Section 1245). This calculator does not model depreciation recapture — it assumes the entire gain is taxed at the long-term capital gains rate. For asset-heavy businesses, the actual tax will be higher; consult a CPA.

Earnout present value

An earnout is a deferred payment contingent on the business hitting performance targets after the sale. Because earnouts carry execution and collection risk, their economic value is less than face value. The calculator discounts the earnout at your chosen rate to show its present value — the risk-adjusted amount it's worth to you today.

Worked example — all-cash sale

A Texas business owner sells for $1,000,000, uses a broker at10%, has $0 in assumed debt, and a tax basis of$150,000. They're in the 15% federal long-term cap gains bracket.

• Broker fee: $1,000,000 × 10% = $100,000
• Gross proceeds: $1,000,000 − $100,000 = $900,000
• Taxable gain: $900,000 − $150,000 = $750,000
• Federal tax: $750,000 × 15% = $112,500
• Texas has no state income tax: $0
• Net after tax: $900,000 − $112,500 = $787,500

The owner receives $787,500 from a $1,000,000 headline price — about 79 cents on the dollar before depreciation recapture.

Assumptions and limitations

• This calculator assumes the entire gain is taxed at the long-term capital gains rate. It does not model depreciation recapture (Section 1245 or 1250), which can significantly increase effective tax.
• State capital gains rates shown are approximate top marginal rates. Actual liability depends on your total income, filing status, and state-specific rules.
• Installment sale tax treatment (IRS Form 6252) may allow spreading the gain across multiple tax years for seller-financed deals — not modeled here.
• Net Investment Income Tax (3.8% surtax on investment income for high earners) is not included.
• This is not tax advice. Consult a CPA and business transaction attorney before any sale.

Frequently asked questions

What is a typical broker commission for selling a small business?

For businesses selling below $1 million, broker commissions typically run 10–12% of the sale price, with a minimum fee of $10,000–$25,000. For deals between $1M and $5M, the rate often steps down to 8–10%. Above $5M, investment bankers typically charge 3–5% plus a retainer.

What is an earnout, and when is it used?

An earnout is a portion of the sale price paid contingent on the business achieving performance targets (revenue, EBITDA, customer retention) in the months or years after close. Buyers propose earnouts when they can't verify the seller's revenue projections; sellers accept them when they believe the business will outperform. Earnouts typically represent 10–30% of the deal value.

What is "tax basis" and where do I find it?

Tax basis is roughly what you originally invested in the business, adjusted for income you retained (which was already taxed), minus depreciation deductions you've taken. For a business you started from scratch, the basis is often low — meaning most of the sale proceeds are taxable gain. Your CPA or accountant maintains this figure on the balance sheet and Schedule L of Form 1120 or 1120-S.

How do I know which federal cap gains rate applies to me?

For 2026, long-term capital gains rates are 0% if your taxable income is below roughly $47,025 (single) or $94,050 (married filing jointly), 15% up to about $518,900 (single) or $583,750 (MFJ), and 20% above those thresholds. A business sale gain typically pushes most owners into the 15% or 20% bracket. Confirm with a CPA.