When planning to sell your online coaching business, many founders focus on valuation and buyer negotiations — but taxes often determine how much you keep after closing.

At Merge, we help founders understand taxes on selling an online coaching business so they can prepare thoughtfully, minimize surprises, and protect their net proceeds.

Here’s what you need to know to navigate this critical part of the sale process.

Why Tax Planning Matters

Taxes can reduce your net proceeds by 20% to 40% or more, depending on deal structure, location, and timing.

Proactive tax planning ensures you understand your likely tax bill, structure the deal appropriately, and avoid last-minute surprises that reduce your net return.

1. Asset Sale vs. Stock Sale: What’s the Difference?

How your deal is structured has significant tax implications.

Asset Sale

In an asset sale, the buyer purchases specific assets of your business (e.g., intellectual property, contracts, client relationships) but not the entity itself.

  • For sellers, asset sales can trigger different tax treatments depending on how the price is allocated across assets.

  • Portions may be taxed as capital gains, while others (like depreciation recapture or non-compete payments) may be taxed as ordinary income.

Most buyers prefer asset sales because they reduce liability risk.

Stock Sale

In a stock sale, the buyer purchases your ownership shares directly, acquiring your entire business entity.

  • Stock sales are generally more favorable for sellers because the entire gain is taxed at long-term capital gains rates.

  • However, buyers may resist this structure unless your business is large and has a clean history.

2. Capital Gains vs. Ordinary Income

Your goal as a seller is typically to have as much of the sale proceeds as possible taxed as long-term capital gains, which are subject to lower rates (typically 15%–20% federally plus state taxes) compared to ordinary income rates (up to 37% federally plus state taxes).

Working with a tax advisor early in the process can help maximize capital gains treatment.

3. Purchase Price Allocation

In an asset sale, the purchase price must be allocated among various asset classes, which determines how they are taxed.

Key categories include:

  • Goodwill and intellectual property: Generally taxed at long-term capital gains rates.

  • Tangible assets: May trigger depreciation recapture taxed as ordinary income.

  • Non-compete agreements: Often taxed as ordinary income.

Purchase price allocation is negotiable and should be handled carefully with your CPA to protect your after-tax proceeds.

4. State and Local Taxes

Your tax bill isn’t just about federal rates. Your state of residence (or where your business operates) may impose additional income tax on sale proceeds.

For example:

  • California and New York impose state taxes on capital gains.

  • Florida and Texas have no state income tax, which may improve your after-tax result.

If you’ve operated across multiple states or have remote employees, additional complexities may apply.

5. Installment Sales and Earn-outs

Some deals include deferred payments like earn-outs or installment payments over time.

  • Installment sales: Allow you to spread income over multiple years, potentially reducing your overall tax rate.

  • Earn-outs: May be taxed differently depending on their structure and whether they are tied to your ongoing involvement.

Careful structuring can improve your cash flow and minimize tax liability.

6. Qualified Small Business Stock (QSBS) Exclusion

If your coaching business is structured as a C-corporation and meets certain conditions, you may qualify for the QSBS exclusion.

  • This powerful provision can allow up to $10 million (or 10x your investment) in sale proceeds to be excluded from federal capital gains tax.

  • Requirements include a five-year holding period and active engagement in a qualifying business activity.

Not all online coaching businesses will qualify, but it’s worth exploring with your tax advisor.

7. International Tax Issues

If you have international clients, operations, or audience members, additional considerations may apply.

  • Foreign income streams may trigger withholding taxes.

  • Value-added tax (VAT) obligations may exist for sales in the EU or other jurisdictions.

  • Foreign bank accounts or entities may require additional reporting.

Addressing these issues before the sale ensures there are no unexpected liabilities or delays.

8. Documentation and Basis

The amount you pay in taxes depends on your “basis” in the business — essentially what you’ve invested over time.

Make sure you can document:

  • Startup costs

  • Capital investments

  • Expenses related to growing the business

  • Adjustments for personal or non-business-related expenses

Good records can reduce your taxable gain and improve your net proceeds.

9. Planning for Post-sale Tax Efficiency

Once you close the sale, you’ll need to manage the proceeds efficiently.

Consider:

  • Timing other income or deductions to minimize your tax bracket

  • Contributing to tax-advantaged accounts

  • Charitable giving strategies that can reduce taxable income

  • Estate and wealth planning for larger exits

A holistic approach ensures you protect your wealth after the transaction.

Why Work with a Tax Advisor and M&A Advisor

Tax planning isn’t something you should tackle alone.

At Merge, we help founders understand taxes on selling an online coaching business so they can work with their CPA or tax attorney to prepare properly and negotiate deals that optimize their after-tax result.

An experienced M&A advisor and tax professional together ensure you:

  • Benchmark your estimated tax exposure early

  • Structure the deal carefully

  • Prepare documentation properly

  • Reduce surprises during closing and beyond

Final Thoughts

Understanding taxes on selling an online coaching business is critical to a successful exit.

By planning ahead, structuring the deal thoughtfully, documenting your basis, and working with the right advisors, you can reduce your tax liability and maximize what you keep from the sale.

At Merge, we help founders think holistically so they can exit confidently and protect their hard-earned wealth.