USA complicated and creative approach to ownership: question


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Situation: Client A wants to buy client B's business for $0 down; to compesate, A will give %25 of net profit to B for the next 5years.

Three Questions: a)How will this transaction be recorded in the books? b) How will taxes be filed? c) What will the %25 payout be titled in the books?

Thank you for reading,
Eric
 
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Client A isn't transferring any consideration at the time of sale?

Why would B give up their claim of 100% of net profits in exchange for 25% of net profits, and nothing else?

I'm sorry I can't answer your question, but it's pretty intriguing.
 
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Client A isn't transferring any consideration at the time of sale?

Why would B give up their claim of 100% of net profits in exchange for 25% of net profits, and nothing else?

I'm sorry I can't answer your question, but it's pretty intriguing.

Let me clarify, it's a deal for full ownership! A wants to do this with "capital gains", we've proposed doing this through wages, but that's not what he wants.

Anyway, I'm truly asking this question because a true professional is stumped and I want to help... I may not understand it all but I appreciate your response and insight greatly!
 

Fidget

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a) Sounds like it should just be treated as a business acquisition.

b) Can't help with that.

c) Call it whatever you like so long as whatever you call it refers to what it actually is.
 
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Client A isn't transferring any consideration at the time of sale?

Why would B give up their claim of 100% of net profits in exchange for 25% of net profits, and nothing else?

I'm sorry I can't answer your question, but it's pretty intriguing.
Client B is giving up %100 of the business because he's leaving the industry for family reasons. The company in question isn't worth a lot now, but has great growth potential.
 

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