The high taxes and fees for transferring a business in the United States stem from complex tax structures, regulatory requirements, and fragmented state-level policies. Federal and state governments impose capital gains taxes, estate taxes, and transfer taxes, while legal, appraisal, and compliance costs further inflate expenses. These costs discourage business transitions and create barriers to economic mobility.

The primary drivers include federal capital gains taxes, which can reach 20% on business asset sales, plus a 3.8% net investment income tax for high-income earners. State-level taxes vary widely; for example, New York imposes a 0.4% transfer tax on business sales, while Texas charges up to 0.5%. Legal fees average $5,000–$15,000 for documentation and compliance, with appraisers typically charging 0.5–1% of the business’s value. Regulatory costs, such as IRS filing fees ($300–$600 for Form 8594) and state-specific licensing, add thousands more. The Tax Policy Center notes that transferring a business worth $5 million could incur $1.2 million in federal and state taxes alone, excluding professional fees. Fragmented compliance across 50 states exacerbates costs, as businesses must navigate differing corporate tax rates (from 0% in South Dakota to 11.4% in California) and transfer rules. The IRS estimates that estate taxes affect 0.3% of estates annually, with exemptions ($13.61 million in 2024) shielding most but not all businesses. These layered expenses reflect systemic inefficiencies and revenue generation priorities, disproportionately burdening small businesses and family-owned enterprises.