Business Tax Strategy
Tax · Exit Planning
The Tax-Smart Business Exit —
Plan 5 Years Out
The moment you sell your business is often the largest single tax event of your life. Plan for it 5+ years out, and you can dramatically reduce the tax bite. Plan for it in the year of sale, and you'll write a check to the IRS for 25-40% of the value you spent decades building.
Federal capital gains exclusion under Section 1202 QSBS
Qualified Small Business Stock — if you structure your C-Corp correctly at least 5 years before exit, the first $10M (or 10x your basis) of capital gains can be completely federal tax-free. Most owners have never heard of this. It can save $2M+ in taxes on the same sale.
Strategies that need 3-5+ year runway
QSBS (Section 1202)
Structure as a qualifying C-Corp. Hold the stock 5+ years. Up to $10M (or 10x basis) of capital gains becomes federal tax-free at exit. Specific industries excluded — check eligibility early.
Installment sale
Sell the business in installments over multiple years instead of a single lump. Spreads the tax over multiple tax years, possibly keeping you in lower brackets and avoiding Medicare surtax thresholds.
Charitable Remainder Trust (CRT)
Contribute appreciated business stock to a CRT before sale. Trust sells tax-free. You receive income for life. Remainder goes to charity at death. Combined with a wealth replacement strategy (life insurance), heirs are made whole.
ESOP (Employee Stock Ownership Plan)
Sell to your employees through an ESOP. Section 1042 rollover allows you to defer capital gains by reinvesting proceeds. Best for companies with strong employee culture and stable cash flow.
Pre-sale gifting / family planning
Gift portions of the business to family members (or trusts) BEFORE major valuation increases. Future appreciation grows outside your estate. Done well, this saves both income tax and estate tax.
Opportunity Zones
Roll the capital gains from a business sale into a Qualified Opportunity Zone investment. Defer the original gains. Hold the OZ investment 10+ years to make the NEW gains tax-free.
Asset vs. stock sale
Buyers want asset sales (better tax treatment for them, more protection). Sellers want stock sales (better tax treatment for you — typically long-term capital gains on the whole thing instead of recapture and ordinary income on portions). The negotiation here can move millions in net proceeds. Start the planning conversation BEFORE the buyer is at the table.
Plan your exit early
If you're within 5 years of a possible exit, this is the highest-leverage planning conversation you can have. We'll review your situation and map which strategies could apply.
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Educational content only. Business exits require coordinated CPA, attorney, and financial-planning input — always work with your team.