Best Tax Strategy for $100k bonus from sale of business

[David M.]

A friend of mine works for a small  laundry mat chain that is for sale.  His boss agreed to a 20% bonus upon sale because he is an essential employee and is responsible for the growth and success of the business over the past 20 years.  My friend ran this business well by himself, did all the repairs, plowing, maintenance, etc.

One location has sold and the closing is scheduled.  My friend stands to receive a nice bonus check.  He plans to buy one of the laundry mat locations and is creating an S-Corp for the business. 

My question is;  what is the best tax strategy he can use in receiving this bonus?  Should he create the new S-Corp and deposit the bonus into the corporate account?  He will need the entire bonus plus more money in order to purchase the one laundry location.

Thank you!

[Henry Clark]

Not financial advice.

Tell your friend to do an LLC and not an S Corp

Have him ask the owner to NOT pay him a bonus

Have the owner lower the price on the location he buys.  This saves the owner paying taxes on both the profit and payroll taxes on the bonus.

Ask the owner to assign part of the sales price to a non compete agreement.  He can write this off in year one or a large portion. 

Do a cost segregation this year as soon as you buy.   Lot of cost seg in a laundry mat.

If there is one, have him pick a location that does cash.   Then switch to credit card.  His revenue will increase 30% immediately.

If equipment needs to be replaced do it this year.   Cost seg year one writeoff is 80% this year.  Next year 60% and so forth.  

Was this a dry cleaner before.  If so have him check on any epa issues.  
This should be a great deal since he did the maintenance and that is the main issue with a laundry mat.