By Jack Lowe, Wealth Strategist
In recent years, the abundance of capital in the market has been a key catalyst for increased merger and acquisition activity. While market conditions continue to evolve, many business owners are actively evaluating their exit strategies. Timing the sale appropriately is important — but it is only one element of a successful transaction. A well-executed succession plan and a thoughtfully designed deal structure are equally important to achieving a favorable outcome.
Preparing for and structuring a sale is a complex process that often requires significantly more time than most business owners expect. From implementing advanced estate planning strategies to determining how and when to communicate the impending transition to family members and key employees, there are numerous factors to consider.
Starting early — ideally several months in advance — and working with experienced advisors can help ensure the process is strategic, efficient, and aligned with long-term goals.
Plan Ahead, Save Big
When selling a business, or even considering a sale in the future, there are several tax-saving strategies that can provide significant benefits and peace of mind for business owners and their families. However, it is crucial to consider these strategies well in advance of the sale. Below are some examples:
- Prioritize Succession Planning: A formal succession plan helps ensure business continuity, minimizes disruption, and clarifies leadership roles before, during, and after a sale. Whether passing ownership to the next generation, key employees, or preparing the company for an external buyer, a documented plan provides direction and preserves value. Addressing leadership succession, ownership transition, and stakeholder communication in advance can significantly strengthen negotiation positioning and increase overall sale readiness.
- Minimize Tax Impact: Income tax savings is top-of-mind for most business owners considering a sale. While many may face a large capital gain tax burden, they might not realize that they could qualify for a Qualified Small Business Stock (QSBS) exclusion. This could reduce taxes on up to $10 million of capital gains, and potentially even more with strategic trust planning.
- Partner Tax Savings and Philanthropy: For business owners with a charitable focus, donating shares of the business to a charitable vehicle such as a family foundation, charitable trust, or a donor-advised fund can significantly reduce capital gains AND provide a tax deduction on the remaining sale proceeds. In addition to tax savings, this strategy can help a family develop a clear path to accomplish their philanthropic goals. The key is to implement these strategies well before a business is sold.
- Continue to Build: Even after selling a business, many entrepreneurs remain eager to keep building. By leveraging Family Limited Partnerships, business owners can invest in new ventures, bring the next generation of the family in as co-owners, and take advantage of significant estate tax savings through strategies like Family LLCs and Irrevocable Trusts. As always, the most impactful tax planning opportunities arise before a sale takes place — making early, proactive planning essential.
Post-Sale Success: Building the Right Team to Manage Your New Wealth
Following the sale of a business or significant liquidity event, many owners envision a carefree future, believing their business days are behind them. In reality, they’ve entered a new chapter — running a different kind of enterprise — a family enterprise, where the focus shifts to managing and preserving the wealth created from the sale.
The reality is that wealth brings complexity and a new set of challenges to navigate. However, with the right team of advisors, that wealth can be successfully managed to benefit many generations.
Rather than managing everything on your own, seek out the help of an experienced multi-family office that can serve as your personal CFO. An experienced team can develop a comprehensive financial plan, including structuring income for family members, planning for future generations, identifying risks and insurance needs, and setting goals for growth, charitable support and community aspirations.
In summary, the keys to selling a business are to plan well in advance and to lean on a team of advisors with extensive experience helping successful business owners prepare for an exit. A well-developed plan will help preserve and grow your wealth for generations to come.
Jack Lowe is a wealth strategist with New Republic Partners. He provides comprehensive tax, estate, business, risk, and charitable planning expertise to individuals, families, and foundations. Jack is a Certified Financial Planner™ (CFP), and an Enrolled Agent (EA, an IRS authorized tax professional).
Contact us to further explore how to prepare to sell your business.
Disclaimer
This document is confidential and has been prepared by New Republic Capital, LLC (“NRC”), a NRP LLC (“NRP”) company, for discussion and informational purposes only, for use by NRP and those who have been furnished this presentation by NRP.
This presentation is not intended as and does not constitute an offer to sell any securities or a solicitation of an offer to purchase any security, investment product, service or any interest in any investment vehicles or accounts managed or advised by NRC or the company’s funds (“each a Fund” or collectively the “NRC Funds”), in any jurisdiction to any person or entity. No such offer or solicitation may be made prior to the delivery of appropriate offering materials, primarily the confidential memorandum prepared in connection with the NRC Funds (the “Confidential Memorandum”), which contains a description of the material terms (including risk factors, conflicts of interest, fees and charges, and regulatory and tax considerations) relating to the NRC Funds, to qualified investors and may be made only in those jurisdictions where permitted by law. Offers for interests in NRC Funds can be made only by the Confidential Memorandum, and in compliance with applicable law.
This update is provided for information purposes only and should not be considered investment advice. Recipient acknowledges that NRC and NRP are not rendering tax advice and that this plan should be further reviewed with a professional tax advisor. Any discussion of tax matters is not intended or written to be used for the purpose of (i) avoiding tax-related penalties under Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting marketing or recommending to another party any tax related matters. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. The opinions expressed herein are those of NRP and are subject to change without notice.
New Republic Capital, LLC (which does business as New Republic Partners) is an investment advisor with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about New Republic Capital’s advisory services can be found in its Form ADV Part 2 and/or Form CRS, which is available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed. This document may contain trade names, trademarks, service marks and logos of other companies which NRP does not own. NRP disclaims proprietary interest in the mark and names of others.