How much does it cost to sell a business?
The headline number from a business sale is the price. The number that actually matters is the net check after fees, taxes, and adjustments. Most owners underestimate the gap by 20 to 30 percent.
The cost stack on a typical small business sale
- Broker commission: 8 to 12 percent. For Main Street businesses under $2M, expect 10 percent. Larger deals (above $5M) often shift to investment banker fee structures with a retainer plus a smaller success fee.
- Legal fees: $5,000 to $25,000. Purchase agreement, bill of sale, non-compete, lease assignment, entity dissolution. Range widens for complicated deals.
- Accounting and tax planning: $3,000 to $15,000. Pre-sale tax structuring, purchase price allocation analysis, post-closing returns.
- Closing costs: 1 to 2 percent. Escrow fees, title work, lien searches, filings.
- Lender or buyer requirements: variable. Quality of Earnings report ($10K to $40K), environmental Phase I ($2K to $5K), equipment appraisal ($1.5K to $5K).
Worked example: $1M business sale
- Sale price: $1,000,000
- Broker commission (10 percent): -$100,000
- Legal: -$12,000
- Accounting and tax planning: -$5,000
- Closing costs: -$10,000
- Pre-tax proceeds: $873,000
- Federal and state tax on gain (varies, often 20 to 35 percent of the gain): -$180,000 to -$300,000
- Net to seller: roughly $570,000 to $695,000
Costs most sellers forget
- Working capital adjustment. Buyer expects a target level of working capital at closing. Anything short comes off your check.
- Escrow holdback. 5 to 15 percent of the purchase price held for 12 to 24 months against indemnification claims.
- Seller financing. Many deals include 10 to 30 percent seller financing, so you do not get the full price in cash at close.
- Earnouts. A portion of price contingent on post-close performance.
The right broker, attorney, and CPA team will not just minimize these costs, they will structure the deal so the net check is as large as possible. Get in touch with BizBuzz Brokers for a free conversation about what a sale could net you.
Frequently asked questions
Who pays the broker commission, the buyer or the seller?+
The seller pays. Broker commission is deducted from the sale proceeds at closing. Buyers do not pay the listing broker.
Can I negotiate the broker commission?+
Sometimes, especially on larger deals (over $2M). For smaller Main Street businesses, the 10 percent commission is fairly standard because the broker's workload does not scale down proportionally with deal size.
What are the hidden costs sellers usually miss?+
Tax on the gain (often the single biggest cost), lease assignment fees, franchise transfer fees, environmental Phase I reports, working capital adjustments, and post-closing escrow holdbacks that delay part of your proceeds for 12 to 24 months.
Do I pay anything before the business sells?+
Usually very little. Most brokers work on a success-fee basis. You may pay a small valuation fee or marketing fee upfront, but the bulk (commission, legal, accounting) is paid at closing.
How is the sale taxed?+
Asset sales (most small business deals) are taxed as a mix of capital gains and ordinary income depending on how the purchase price is allocated. Stock sales are usually capital gains. Talk to a CPA before signing an LOI: the structure can change your tax bill by tens or hundreds of thousands.
Get a free valuation conversation.
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