Come on Down, Then Sell Your Hosting Company

This is a no-brainer that can be hard to do. Family, friends, schools, pets all figure into the situation. But is should be on your plate.

Here are some of the top rates for state income taxes; Vermont 9.5%, Oregon 9% and New Jersey 8.97%.

Now there are many other states with high state income taxes. The California State Motto is Eureka "I have found it!" is aptly stated. After all California has a 9.3% state income tax rate plus a 1% kicker imposed on taxable income over $1 million. If I read the tax codes right that equals 10.3%.

Since it makes my case, let’s look at the worst case. You net $500k from your hosting business. In California you pay about $45k in state income taxes and another $155k in Federal Income Tax. So 40% goes to the government. Not to mention FICA, 8.5% sales tax etc.

So you decide to sell the business, it sells for $5 million. In California that adds about $500,000 of your money to the state coffers. You get $500k less. Your retirement fund just dropped $500k. That Ivy League school for the kids is a bit tougher to handle.

Do some family planning. Move to Florida, it has zero, nada, and no state income tax. So does Alaska, Nevada, South Dakota, Texas, Washington and Wyoming.

Now the M&A Part – Buyers don’t make up for the sellers shortfall. It is just as easy to buy a company in Texas as in California. Think this one over for a while.

So talk to your attorney and accountant, make sure everything’s legal and makes sense. Then come on down to Florida a couple years before you sell. You could add some $600k to the retirement fund. Oh yes, real estate is a bargain since the bubble burst.

Written from Cape Coral, Florida - Rather than our old Milwaukee diggs (6.75%)

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