Glossary · Reading the business
Deferred compensation
In short
Money earned by an employee or owner but paid out later, often to reduce current tax liability. As a buyer, you need to understand if these liabilities will transfer with the business.
What it means in a deal
For a seller, deferred compensation may be an add-back if it's discretionary and won't continue under new ownership. Ensure the deal structure accounts for any outstanding obligations, otherwise, you could inherit a significant future payout liability.
Related terms
Common questions about Deferred compensation
- Can the seller receive any form of compensation from the acquired business during the standby period of their seller note?
- What if the business I'm buying has existing deferred revenue or unearned income?
- Can a partial equity injection come from a deferred management bonus from my current employer?
- How does a lender underwrite a business acquisition with existing deferred revenue or unearned income?
- How does a lender assess deferred maintenance or capital expenditure needs of an acquired business?
- Can a seller note with deferred payments but no interest count as full standby for equity injection?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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