Electrical Asset Sale vs. Stock Sale: Taxes (2026)
Nearly every electrical deal is an asset sale. On a $3 million sale that choice costs you about $79,000 more in federal tax than selling the company.
- Your vans and tooling are the problem. Anything you already wrote off gets taxed like wages.
- Electrical has two arguments most trades do not. Your bonding and your pension both live inside the company.
- This is decided in the offer letter. Not at closing, and not by your accountant afterwards.
- The Two Ways to Sell
- Why Buyers Want the Assets
- Why It Costs You More
- The Math on a $3 Million Sale
- Side by Side
- Two Arguments Only Electrical Sellers Have
- The Permit Question Sits on Top
- The Middle Ground for S Corporations
- If You Are a C Corporation, Read This Twice
- Where You Live Changes the Total
- Settle This Before You Sign
- Related Guides
- Frequently Asked Questions
The Two Ways to Sell
You can sell the things the business owns, or you can sell the business itself. The paperwork looks similar. The tax does not.
- Selling the assets. The buyer takes your vans, tools, contracts, customer list and name. Your company keeps its own history.
- Selling the company. The buyer takes the whole thing, including everything that happened before they arrived.
Why Buyers Want the Assets
Two reasons, and both are about them, not you.
- They get fresh write-offs. Buying the assets lets them start depreciating your vans again from the price they paid.
- They leave your history behind. An old injury claim, a disputed change order, an unpaid payroll tax bill. None of it follows.
Why It Costs You More
Every dollar of the price has to be assigned to something, and each thing is taxed differently. The buyer and seller file the same split with the government.
- Your name and customer list get the long-term rate, 15% or 20%, plus a 3.8% investment income tax once you earn enough.
- Your vans, benders and test gear are different. Anything you already deducted gets taxed again at your regular rate, up to 37%.
The Math on a $3 Million Sale
Take a $3M sale. You put in $300,000 originally, you run an S corporation, and you are in the 20% bracket.
If they buy the company
Your gain is $2.7M, all of it at the lower rate. Federal tax is $540,000, and the investment income tax adds $103,000.
Total: about $643,000.
If they buy the assets
Say $600,000 lands against equipment you already wrote off. That piece is taxed like wages: $222,000.
The other $2.4M, less what you put in, is taxed at the lower rate. That is $420,000, plus $80,000 of investment income tax.
Total: about $722,000, or $79,000 more.
Side by Side
| What Matters | They Buy the Assets | They Buy the Company |
|---|---|---|
| Name and customer list | Lower rate | Lower rate |
| Vans, tools, test gear | Your regular rate | Lower rate |
| Your bonding record | The buyer starts over | Stays with the company |
| Union pension bill | Needs a federal exemption | Stays inside the company |
| New Jersey permit | New one, at a monthly meeting | Survives, licensee change still filed |
| Old liabilities | Stay with you | Go with the company |
| Who pushes for it | Buyers, hard | Sellers |
Two Arguments Only Electrical Sellers Have
Most trades ask for a company sale and get told no. You have two reasons a buyer actually has to think about.
Your bonding record does not transfer
A surety bonds a business on its credit, capacity and character. A brand new company has none of that yet.
If your commercial work needs bonds, the buyer’s new entity has to build that standing itself. Buying the company keeps yours.
The union pension follows the structure
If your electricians are union, walking away from the plan can trigger a bill for your share of what it is short.
- Buy the assets and the sale needs a federal exemption, which means the buyer keeps contributing and posts a bond for five years.
- Buy the company and the obligation simply stays where it is.
- Either way, get the number early. The plan takes weeks to produce it, and no buyer signs without it.
The Permit Question Sits on Top
In New Jersey a new company needs its own business permit, and the board approves those at a monthly meeting.
Selling the company keeps the permit alive, though the named licensee still has to be sorted. Either route needs planning, and the asset route needs more.
The Middle Ground for S Corporations
There is a version where the buyer takes the company but is treated as buying the assets. They get their write-offs and you avoid the worst of the split.
- You have to be an S corporation, and the buyer has to be a corporation taking at least 80%.
- It is filed with the deal, not afterwards, so your accountant needs to be in the room early.
- Bigger buyers know it. The investor-backed platforms buying above $10M use it. Small roll-ups usually do not.
If You Are a C Corporation, Read This Twice
An asset sale out of a C corporation is taxed twice. Once inside the company, then again when the money reaches you.
This is the one case where structure is worth more than the price you negotiate. Find out which type you are before you talk to anybody.
Where You Live Changes the Total
The state bill lands whichever way you sell, but it is big enough to plan around.
- Pennsylvania takes a flat 3.07%. On a $2.7M gain that is about $83,000.
- New Jersey taxes the gain like a paycheck, up to 10.75%. On the same gain that is about $290,000.
- Neither state gives you a break for selling a company you spent thirty years building.
- Selling in Pennsylvania? The state guide covers the clearance and the licensing.
- Selling in New Jersey? The state guide covers the permit and the escrow.
Settle This Before You Sign
- Find out whether you are an S corporation or a C corporation. It changes everything below.
- Add up what you have already written off on vans, tooling and test gear. That is the number that gets taxed like wages.
- Ask your pension plan for a withdrawal estimate, if your crews are union.
- Put the split in the offer letter. Once you sign without it, you have given the argument away.
- Get a free valuation and buyer introductions. No fee, no exclusive, no obligation to sell.
Related Guides
- What electrical companies sell for, and what your size is worth.
- Investor-backed buyers versus local competitors, and which one signs this structure.
- How long the whole sale takes, including the permit and pension delays.
- Keeping the negotiation private: how an off-market sale works.
Frequently Asked Questions
A company sale is better for you and an asset sale is better for the buyer. On a $3 million deal the difference is about $79,000 in federal tax. Most electrical deals end up as asset sales, but bonding and union pensions give you real room to push back.
Because you already deducted them. When the buyer pays for gear you have written down, the government takes that benefit back. It is taxed at your regular income rate, up to 37%, rather than the 15% to 20% long-term rate.
No. A surety bonds a business on its credit, capacity and character, and a brand new company has not built any of that. If your commercial work needs bonds, that is a genuine argument for selling the company instead.
If the buyer takes the company, the obligation stays where it is. If they take the assets, leaving the plan can trigger a bill. The sale needs a federal exemption, which means the buyer keeps contributing and posts a bond for five years.
The buyer takes the company but is treated for tax as buying the assets. They still get their write-offs and you avoid the worst of the split. You have to be an S corporation and the buyer has to be a corporation taking at least 80%.
Pennsylvania charges a flat 3.07%, so a $2.7 million gain costs about $83,000. New Jersey taxes the gain like a paycheck at up to 10.75%, which is roughly $290,000 on the same gain. Neither depends much on how you structure the deal.
In the offer letter, before you sign anything. The structure is set there, and once you have signed without naming it you have given away the argument. Bringing it up during the buyer’s review of your books is far too late.