REDUCE THE COST OF AN EARN OUT BY UP TO 40%

Here's an idea I've been modeling:

When buying a company using an earn out, structure it as a consulting contract to the former owner. This makes the payments an expense to you which is pretax money and reduces the cost of the earn out by up to 40% (or whatever your tax rate is). The former owner can then use a Defined Benefit Plan or Solo 401`(K) to shelter the income from taxes until they withdraw the funds.

It's a potential win-win.

Thoughts?



share: