Why Tax Planning Matters When You Sell Your Business
Selling a business is one of the biggest financial events most entrepreneurs will ever experience. After years of hard work, sleepless nights, and reinvested profits, the sale represents the culmination of everything you've built. But for many owners, the celebration is short-lived — because the IRS is waiting on the other side of the deal.
I recently sat down with a client who was preparing to sell her business for roughly $30 million. As we walked through the numbers, I said, "That's going to result in about a $6 million tax bill."
Her eyes widened, and she leaned forward, almost startled. "That's exactly what our CPA told us we're going to owe," she said.
Then came my follow-up question: "Did they give you any strategies to reduce that bill, or just tell you to be prepared to write the check?"
The answer was simple: "No. They just said to expect it."
The Problem With "After-the-Fact" Tax Work
This is where many business owners find themselves. They hear a number — often in the millions — and assume there's nothing they can do. Their CPAs are skilled at running the calculations and filing returns, but there's a difference between compliance and planning.
Compliance
Is about reporting history: making sure last year's tax return is filed correctly.
Planning
Is about shaping the future: taking proactive steps to minimize the amount you owe.
And here's the catch: compliance tells you what you owe, while planning shows you how much you can keep.
Too often, after hearing the size of the tax bill, owners make a decision that feels logical in the moment but is deeply flawed in the long run. They think: Maybe I'll keep running the business longer. Maybe if I grow it larger, the post-tax amount will be big enough to make the difference.
In other words, they delay retirement or take on more stress, not because they want to, but because they don't realize there's a better option.
It's an exhausting path. And it ignores the fact that the IRS is set to claim as much as 37% of your profit — a silent partner you never invited into your business, who contributed nothing to your success.
What We Did Differently
In this client's case, the $6 million wasn't the end of the story. Instead of treating it as an unavoidable cost, we designed a strategy to reduce it significantly.
Here's how:
Deferral Structures
We spread out the gain across time, reducing the immediate impact and allowing the client to reinvest funds that would otherwise have been sent to the IRS.
Elimination Strategies
Certain structures and charitable planning tools can permanently erase a portion of the tax liability. These are legal, proven strategies that shift wealth away from taxation and toward long-term family benefit.
Wealth Transfer Techniques
We positioned assets in a way that benefitted not only the seller but also their heirs. Instead of the IRS receiving a windfall, the family created a multigenerational wealth plan.
The result? We knocked down a large portion of that $6 million tax liability. Instead of writing a massive check to the government, the client and her family will keep millions more invested, working for them instead of against them.
Why Timing Is Everything
The single biggest factor in whether tax planning works is when you start.
Once the ink is dry on the sales agreement and the money hits your account, the IRS already has its claim. At that point, your options are minimal.
The best outcomes happen when you begin planning early — ideally before a letter of intent is even signed. That's when the full menu of tax-saving strategies is available. That's when you can build a plan to maximize what you keep, not just what you sell for.
1
Before LOI
Full range of tax planning options available
2
During Negotiations
Some strategies still viable but options narrowing
3
After Sale Closes
Minimal options, tax liability largely fixed
The Bigger Picture
For most owners, selling their business isn't just another transaction. It's the culmination of a lifetime of effort. You've sacrificed weekends, vacations, and sometimes even health to build something valuable.
But without proactive planning, as much as 37% of your profit can disappear to taxes — effectively giving a third of your life's work to a partner you didn't choose, one who contributed nothing to your success.
Tax planning flips the script. It turns a taxable event into a wealth-building event. It ensures that the reward for your hard work goes first to you and your family — not disproportionately to the government.
Final Thought
This client walked into our meeting expecting to lose $6 million to taxes. By the time she left, she realized there was a very different path forward. That's the power of proactive planning.
If you're considering selling a business, don't settle for simply knowing your tax bill. Without planning, you're handing over as much as a third of your profit to a silent partner who never shared the risk or the work.
With planning, you can change the outcome — and that difference may be the single largest financial opportunity of your life.
Don't just calculate your tax bill. Reduce it.Proactive planning can be the difference between writing a massive check to the government and keeping millions more for yourself and your family.