By Christopher Walczak, Partner and Senior Client Advisor
The sale of a business should mark the pinnacle of a career—a celebrated milestone when a business owner finally unlocks value built over years of hard work.
So often, however, this milestone event is dampened for business owners by a host of financial difficulties ranging from unexpected tax consequences to a misallocation of proceeds, all of which can have a lasting impact on wealth and emotional well-being.
After years of working with families to ensure that the sale of a business is cause for uncorking a fine champagne, our WMS team can pinpoint precisely what separates the successful transitions from the disappointing ones: Preparation.
Carefully planning well in advance of a sale can help secure a better price, shield proceeds from taxes, mitigate issues that wealth creates for families and set realistic expectations for life’s next chapter.
Lay the groundwork
The first step in a successful transition is to draft a financial plan that identifies monthly expenses and income needs. Basic as that may sound, bringing these numbers into focus can be a challenge for many business owners who lump their personal and business expenses together. And it’s an essential step toward understanding which techniques—what mix of investments, trusts, gifting strategies, for example—will be most effective to sustain a matriarch or patriarch’s lifestyle while still allowing for the effective transfer wealth.
Define goals
Here’s where the science of financial planning meets psychology: prioritize goals for the wealth that’s expected to be derived from the sale of a business.
This requires a deep dive into personal values and a candid look at family dynamics. Big liquidity events can fuel expectations for big spending sprees—how do you address this? How much do you want to pass on to your children and how do you prevent them from blowing it all? Will you divide assets evenly? What are your charitable intentions?
Families are complex. There may be a spendthrift child, a dependent parent or a special needs grandson who aren’t capable of managing money. By identifying how assets should be managed long before a sale, a business owner may avoid hasty—and possibly regrettable—decisions once significant liquidity is realized.
Prepare your business
Well in advance of a sale, come up with a timeline for improvements to positively impact a business’s value. This may involve technological upgrades, shuttering a sluggish product line or cost cutting measures. And be sure to tidy up—just as a homeowner would steam clean carpets and power wash a deck prior to listing a property, business owners should clean up the books and make sure orderly systems are established for record keeping, bill-paying and other administrative matters. A prospective buyer may pay a premium for a smooth transition.
Take note of a higher estate tax exemption
Consider taking advantage of a new higher estate tax exemption before it expires. The Tax Cuts & Jobs Act doubled the exemption to $11.4 million per individual—or $22.8 for couples—but in 2026 it’s scheduled to revert back to $5.5 million. This creates a unique window of opportunity for taxpayers to transfer significant shares of a business free of gift and estate taxes.
Get a jump on wealth transfer strategies
For folks whose wealth exceeds the estate tax exemption, gifting shares of a business as soon as possible—before they increase further in value—can help mitigate the 40% estate tax bite.
For example, assets can be gifted to a trust, where they appreciate out of your estate, or to a family limited partnership through which you can transfer shares of your business to beneficiaries at a discount.
Yet other options can help ease the sting of income taxes. Passing shares of your business to charity through trusts, foundations and donor advised funds can fulfill your philanthropic goals while providing a nice income tax deduction.
This can all seem daunting—and yes, it is complex stuff. But better to tackle it now than to suffer for avoiding it. Nobody said it better than ole Ben Franklin: “Failing to plan, is planning to fail.”
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