For many business owners, selling a company represents the culmination of decades of work. The focus naturally turns toward valuation — what is the company worth, who is the buyer, what multiple can be achieved?
Yet one of the most important questions is often overlooked: How much of the proceeds will actually stay in your pocket?
A successful sale is not determined solely by the purchase price. It is determined by what remains after taxes, transaction costs, and planning opportunities are considered. This is why tax planning has become one of the most critical components of preparing for a liquidity event.
"Many of the most valuable tax strategies must be implemented long before a transaction occurs. Waiting until a deal is imminent often limits flexibility and reduces available options."
Enterprise value vs. personal wealth
Business owners often focus on enterprise value — and buyers do the same. However, enterprise value and personal wealth are not necessarily the same thing. Consider two business owners who each sell a company for $20 million. One implemented thoughtful tax planning years in advance. The other did not. The final after-tax outcome may differ dramatically.
The true measure of a successful liquidity event is not simply what the company sells for. It is what the owner ultimately retains and how those proceeds support future goals.
10 tax mistakes to avoid before selling
Mistake 01
Waiting until a deal is on the table
This is perhaps the most common mistake. Many owners begin exploring tax planning only after receiving serious buyer interest. Unfortunately, some of the most effective planning opportunities require time. Potential strategies may involve:
- Trust structures
- Gifting programs
- Entity reviews
- Charitable planning
- Residency considerations
Once a letter of intent is signed, planning flexibility often narrows significantly. The earlier planning begins, the more options typically exist.
Mistake 02
Ignoring Qualified Small Business Stock opportunities
For certain business owners, Qualified Small Business Stock (QSBS) may provide significant tax advantages under Section 1202 of the Internal Revenue Code.¹ When eligibility requirements are met, a portion of capital gains may qualify for favorable treatment. However, qualification rules can be complex and require careful evaluation. Questions may involve:
- Entity structure
- Business activity
- Holding periods
- Ownership requirements
Business owners should work closely with qualified tax professionals to determine whether QSBS opportunities may apply.
Mistake 03
Failing to coordinate estate planning before a sale
Many owners view estate planning and tax planning as separate conversations. In reality, they are often deeply connected. Prior to a liquidity event, certain strategies may allow business interests to be transferred before a significant increase in value occurs. Potential planning techniques may include:
- Irrevocable trusts
- Gifting strategies
- Family wealth transfer structures
- Charitable vehicles
After a transaction closes, many of these opportunities may become less effective or unavailable. Timing matters.
Mistake 04
Overlooking state tax exposure
Federal taxes often receive the most attention. State taxes can be equally important. For owners considering relocation or residency changes, planning may require careful documentation and implementation years before a transaction. State residency audits can be complex and highly scrutinized.
The decision to relocate should never be based solely on taxes. However, understanding potential state tax implications remains an important part of liquidity event planning.
Mistake 05
Waiting too long to consider charitable planning
Many business owners support charitable causes throughout their lives. A liquidity event can create additional opportunities for charitable planning. Potential strategies may include:
- Donor-advised funds
- Charitable remainder trusts
- Private foundations
- Direct gifting of appreciated assets
When implemented before a transaction, these structures may offer different planning outcomes than those established afterward.
Mistake 06
Assuming all sale structures are equal
The structure of a transaction can significantly influence tax outcomes. Examples may include:
- Asset sales
- Stock sales
- Installment arrangements
- Earn-outs
- Deferred compensation structures
Different structures may create different tax consequences. Owners should understand how deal terms interact with their broader financial plan before entering negotiations.
Mistake 07
Focusing only on the sale and not the proceeds
Many owners spend years planning the transaction itself — far fewer spend time planning what happens afterward. Questions often include:
- How will proceeds be invested?
- What level of liquidity is needed?
- How much risk is appropriate?
- How will future income be generated?
A liquidity event often transforms a business owner into an investor overnight. This transition deserves planning attention of its own.
Mistake 08
Not preparing for estimated tax obligations
Liquidity events can create substantial tax liabilities. Without proper planning, owners may face:
- Large quarterly payments
- Cash flow surprises
- Underpayment penalties
- Liquidity challenges
Understanding anticipated obligations before closing helps create a smoother transition.
Mistake 09
Forgetting family wealth transfer goals
Many owners eventually ask: "What do I want this wealth to accomplish?" A liquidity event may create opportunities to:
- Support future generations
- Fund educational goals
- Establish philanthropic initiatives
- Create family governance structures
Tax planning becomes most effective when aligned with broader family objectives.
Mistake 10
Treating tax planning as a one-time exercise
Tax planning does not end at closing — in many ways, it begins. Post-sale planning often involves:
- Investment tax efficiency
- Charitable strategies
- Estate planning updates
- Withdrawal planning
- Ongoing wealth management
The most successful outcomes often result from continuous planning rather than one-time decisions.
Why business owners should start early
Research from the Exit Planning Institute consistently shows that business owners who begin planning earlier often experience greater flexibility and more favorable outcomes.² Early planning creates opportunities to:
- Evaluate alternatives
- Coordinate advisors
- Improve documentation
- Implement strategies gradually
- Avoid rushed decisions
Perhaps most importantly, it allows owners to make decisions from a position of strength rather than urgency.
The strategic takeaway
The value of a business sale is not determined solely by the purchase price. It is determined by how effectively the proceeds are preserved, managed, and aligned with long-term goals. The most successful liquidity events rarely result from last-minute planning — they are often the product of years of thoughtful preparation involving:
- Tax strategy
- Estate planning
- Charitable planning
- Wealth management
- Family considerations
Because when it comes to a business sale, keeping more can be just as important as earning more.
Planning ahead creates more options
Many tax planning opportunities are most effective before a transaction becomes imminent. A proactive review may help uncover opportunities while time remains on your side.
¹ Internal Revenue Code Section 1202, Qualified Small Business Stock — irs.gov
² Exit Planning Institute, State of Owner Readiness Survey — exit-planning-institute.org
Investment advisory and financial planning services offered through Bleakley Financial Group, LLC, an SEC registered investment adviser, doing business as OnePoint BFG Wealth Partners (herein referred to as "OnePoint BFG"). For more information regarding OnePoint BFG including important disclosures, please visit adviserinfo.sec.gov.
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