Selling a med spa: taxes 101
Asset vs. stock sale, allocation of purchase price, and the tax levers most owners don't know about until they're in diligence.
Updated July 11, 2026
This is not tax advice
This guide is a framework. Every deal has quirks. Get a real CPA and a real M&A attorney before you sign anything.
That said, here is what most owners do not know until it costs them.
Asset sale vs. stock sale
Most med spa sales are asset sales. The buyer buys the business assets (equipment, customer list, brand, contracts) but not the legal entity. This is what buyers want because it gives them a step-up in basis for tax purposes and limits successor liability.
Stock sales (or membership interest sales for LLCs) transfer the entity itself. Sellers usually prefer these because they get long-term capital gains treatment on the full sale price.
The negotiation lever: buyers will often pay a slightly higher price to do an asset sale, because the tax savings on their side outweigh yours.
Allocation of purchase price
In an asset sale, the purchase price gets allocated across categories:
- Furniture, fixtures, and equipment (FF&E)
- Inventory
- Customer list and non-compete
- Goodwill
Different categories have different tax treatments. Goodwill is capital gains for the seller. Non-compete allocation is ordinary income. Buyers want more allocated to depreciable assets. Sellers want more allocated to goodwill.
The allocation is negotiated. Fight for it.
Working capital adjustment
Almost every deal has a working capital true-up at close. If you have unusually high receivables or inventory at close, you might collect an additional payment. If you have unusually low, you might owe money back.
Model this before you sign the LOI, not after.
Escrow and hold-back
10% to 15% of the purchase price is often held back in escrow for 12 to 24 months to cover indemnification claims. Understand what triggers a claim on that escrow before you sign.
Earn-outs
An earn-out is a portion of the purchase price tied to future performance. Common on deals where the seller is staying on as a provider. Common mistakes:
- Vague performance metrics
- No cap on the earn-out
- No protection if the buyer changes the business
State-level considerations
- Corporate practice of medicine rules affect deal structure in some states
- Sales tax on the transfer of assets varies
- Real estate transfer tax if you own the property
Common mistakes
- Not modeling the after-tax proceeds until after LOI
- Signing an asset sale without negotiating allocation
- Skipping the state-level review