Single member LLC (sole proprietor) sale of small business

[muchica]

I owned a small healthcare practice for the past 16 years.  Single-member LLC.  I sold the practice to a new practitioner in 2024.  The purchase agreement only included the tangible office equipment/furnishings and intangible "goodwill."  The purchase agreement did include a non-compete clause if that is of importance, although there was not a monetary value put on that clause.  For 16 years, I just filed a Schedule C for the business.  The equipment and furnishings were 8 to 16 years old, nothing new.  All equipment and furnishings were just paid off the year they were bought, not depreciated.  The purchase agreement delineated a certain amount, let's say $5,000 for Class V tangible assets (the equipment and furnishings) and let's say $20,000 Class VI and VII (intangibles, goodwill of going concern, etc.).  Where are these figures entered in TurboTax?  Does it matter that the Class V tangibles were sold at the same cost they were purchased at?  Meaning, there was no "profit" on the tangible equipment/furnishings.  For example, if a file cabinet was bought at $50 ten years ago, it was listed for $50 on the asset list and sold for $50.  The buyer agreed to purchasing all the equipment/furnishings at their original cost because they were all in perfect working order and could continued to be used for years to come.  

[RobertB4444]

If you never depreciated the office property then you can list it as a sale of office equipment valued at $5000 for $5000.  It will be a wash.

To enter this in TurboTax go into your schedule C and click on assets and depreciation and then follow the steps there entering zero for prior depreciation and section 179 deduction.  In the end there will be no gain or loss on the sale.

@muchica 

[muchica]

Thank you for the help!  Do you have any feedback on where the other part of the sale is entered (Class VI intangibles and Class VII "goodwill") ?  I read somewhere online that these are taxed at as capital gains so entered on Schedule D....but there is a lot of different advice on TT and elsewhere  about how to handle a small business sale, so want to ensure I do it correctly.  And if they are taxed at capital gains rate, do I list the cost basis as 0 since I started the business 16 years ago and therefore all the intangible value of the business/name/etc. has been built over time from zero?  Any advice on this part would be greatly appreciated!  Thanks in advance!

[RobertB4444]

The sale of the business is based on your investment in it.  That is how you arrive at the basis for the sale.  If you have zero dollars tied up in the business (as in any money that you put into it you have already taken out) then the sale of the business is 100% capital gains.

For your purposes you can enter the sale in the same location where you entered the sale of the furniture and equipment from earlier, on your schedule C.  Entering it there will carry the necessary amounts over to schedule D and form 4797 (if required).  

Enter the date of purchase as the date that you started the business and the basis as any money you still had tied up in the business at the time of sale.  The goodwill is just a part of the business sale.  You should enter the purchase price as the total amount that you received less the $5000 that you already used for the furniture and whatnot.

@muchica