[alooPotato]

ha no. do the math on it and you'll see that a sale is far more profitable for equity holders than cashflowing profits for the same nominal amount. I.e. distributing $3.7M in profits yields you personally a lot less than having your equity purchased for $3.7M.

You're comparing apples and oranges - 500K/year of profits first needs to get taxed. Then distributed to shareholders pro-rata, then taxed again at the personal level. Also, you're assuming he could have made 500K year in profit from the very beginning.

[GoRudy]

Pass through entities wouldn't be subjected to the double taxation.

[alooPotato]

Yeah but you pay a higher tax rate and get no benefits of QSBS. Generally there is a lot more opportunity for tax optimization on sales than on income.

[arthurcolle]

> higher tax rate

Isn't this only if the distributions are immediate? Forgive me, not an expert in LLC v. corp structures but I have an LLC so I'm curious to hear your expanded thoughts. Thanks in advance.

[alooPotato]

Income tax rates are usually higher than capital gain tax rates.