Taxes can take a bigger bite out of your business sale than you’d expect. Imagine you just closed the deal on selling your business, thinking you’re walking away with a fortune—until the IRS shows up like an uninvited guest at your retirement party. Suddenly, your hard-earned nest egg shrinks faster than a cheap sweater in the dryer.
The Bite Taxes Can Take
A friend of mine—let’s call him Joe—sold his business for $5 million. He was thrilled, right up until his CPA ran the numbers. After federal and state taxes, capital gains, and a few surprises, he was left with closer to $3 million. Don’t get me wrong, $3 million is still a good day at the office, but he hadn’t planned for such a big cut going to Uncle Sam. If he had structured the deal differently, he could have kept a lot more.
How to Keep More of What You’ve Built
- Know Your Tax Bill Before You Sell Sit down with your CPA early. Understanding your potential tax liability can help you structure the deal in a way that minimizes what you owe. There’s a big difference between ordinary income tax rates and long-term capital gains rates.
- Consider Installment Sales or Stock Transfers Instead of taking one big payout (and one big tax bill), you might explore installment sales or stock transfers that spread the tax burden over multiple years.
- Leverage Retirement & Estate Planning Strategies Work with your financial planner to see if setting up a trust, funding a retirement account, or gifting shares in advance can reduce your tax exposure.
Plan Ahead for a Smooth Exit
The best time to think about taxes in your exit strategy? Before you sign anything. If you’re planning to sell in the next few years, now is the time to work with professionals who can help you walk away with more.
Don’t let taxes take a bigger cut than they should. Book a tax-focused exit planning session today.
