Selling Your Business? Plan to Protect Your Proceeds and Avoid Individual Tax Pitfalls

At a glance

• Plan early to save: The right entity structure, estate plan, and timing of charitable gifts can make a big difference in tax impacts from a sale.
• Customize your approach: Retirees, serial entrepreneurs, and mid-career business owners need different pre-sale tax strategies.
• Mind state and federal rules: Address multistate tax exposure, leverage opportunities like qualified small business stock (QSBS) and qualified opportunity zones (QOZ), and stay ahead of changing tax laws.

In the post-COVID era, many business owners are reassessing their priorities after years of uncertainty — and giving M&A a fresh look. Whether you’re gearing up for your next big venture or handing off your business to a successor, understanding the tax implications well in advance can make a multimillion-dollar difference.

Proactive planning is especially critical in today’s market, where fluctuating interest rates, inflation concerns, and shifting tax laws can change the math overnight. Case in point: the One Big Beautiful Bill Act (OBBBA), which adds complexity to M&A related charitable contributions, but can benefit sellers in other areas, like QSBS and QOZ.

In what follows, we’ll discuss pre-sale tax strategies business owners should keep top of mind when considering a sale in 2025 and beyond — and why bringing your advisors in early can make all the difference.

What Kind of Seller Are You?

When it comes to pre-sale tax strategies, when — and why — you are selling matters. Common sale triggers include succession planning (or lack thereof), unsolicited offers from buyers, and the urge to start a new venture.

“Silver Tsunami” Owners

• These sellers are often at the end of their professional careers. Having built up businesses in construction, real estate, and other industries, they’re focused on preserving wealth, as well as their legacy. Their next steps? Serving on boards, volunteering, or spending more time with family.
• M&A may be both the retirement plan and the succession plan if the next generation does not want to take on the business. For owners who don’t want to sell to a third party, employee stock ownership plans (ESOPs) are an increasingly popular strategy, offering a range of tax benefits and estate planning advantages, especially when it comes to capital gains.
• Charitable contributions are important. Plan your donation strategy well in advance of finalizing a sale. OBBBA changes may restrict sellers from reducing capital gains tax for some charitable donations; additionally, income limits could significantly affect deductible amounts in the year of sale.

Serial Entrepreneurs

• “Next chapter” founders tend to be in their 30s and 40s. They’re focused across a broad range of sectors, from online sales to medical and tech-adjacent businesses.
• Some already have multiple business ventures or plan to start another quickly. Minimizing a tax hit now is a priority to keep capital for reinvestments. Clients who use sale proceeds to create or invest in real estate QOZ funds can defer capital gains tax, with the OBBBA offering new opportunities for investors who invest on or after Jan. 1, 2027; the bill also increased the benefit relating to the QSBS tax exclusion.
• Less focused on charitable giving. At this stage, these sellers often aren’t ready to commit large sums of money to philanthropy, regardless of the tax benefits. They may want to keep capital liquid so they can reinvest in the next venture or focus on estate planning.

Plan Ahead to Optimize Tax Benefits from a Sale

In a perfect world, business owners would have a runway of at least six to 12 months or longer to get their tax plans in order ahead of a sale. In the real world, we see a range of timelines. Some sellers laid the groundwork years before but have been biding their time waiting for markets to improve or for interest rates to go down. Other business owners may not have even considered M&A until an attractive offer showed up unannounced.

Whatever the timing, the sooner you can bring your advisors in, the greater your ability to maximize the tax benefit of the sale. Some important pre-deal considerations include:

Entity Structure

• Is your current structure (partnership/LLC, S corporation, C corporation) the most tax-efficient for the sale? Converting to a C corporation, for example, may open QSBS exclusions, but timing rules are strict and restructuring can be complex, so planning is key.
• For example, a business owner client with an LLC was moving from California to Florida. The CBIZ tax team was able to restructure the business in such a way that when the sale was effectuated, the sale was treated as the business owner sold stock in an S corporation rather than selling membership interests in an LLC. In the end, the client avoided California state income taxes on the sale.

State Tax Issues

• Understand your business’s state income tax and state sales tax situation and address nexus and multistate exposure early to avoid last-minute surprises. You don’t want to get deep into a sale agreement with the buyer only to park millions of dollars in escrow due to unknown state income or sales tax liabilities.
• The structure of the sale also impacts the amount of state income tax due. The sale of stock or partnership/LLC interests looks much different than the sale of assets from a state perspective.

Estate Planning

• For pre-sale gifting, consider forming trusts for spouses or children if you have sufficient runway. Take advantage of valuation discounts to move appreciating assets out of your estate, so the appreciation on those assets avoids any estate tax.
• Example: A minority business interest with a fair market value of $2 million that is gifted may be eligible for a lack of control and lack of marketability discount. A qualified valuation would determine the discount that is supportable and recommended. If, in our example, it was determined there is a 25% discount (combined lack of control and lack of marketability), then the gift of 25% interest would be valued as $375,000 instead of $500,000, saving a lifetime exemption of $125,000 in our example.

Charitable Giving

• Timing is essential for various reasons. We’re advising wealthy clients to contribute more this year because of changes under the OBBBA, which impose a 0.5% floor on individual itemized charitable deductions and limit the tax benefits for individuals in the highest tax bracket to 35% (versus the actual tax rate of 37%).
• For sellers who want to give proceeds to qualified 501(c)(3) organizations or donor-advised funds, the most tax-efficient move is to gift stock well before the sale to avoid capital gains tax on the stock gifted, deduct the full fair market value of the stock at the time of donation, and be prepared for any IRS challenges. If you sell the stock and then donate the cash, you will owe capital gains tax on the gain.

Best Pre-Sale Tax Practices for Individual Sellers

• Bring your advisor team in early — tax, legal, estate, and state tax experts should coordinate.
• Review and confirm all legal documents (e.g., buy-sell agreements, S Corporation election acceptance).
• Understand and plan for multistate tax liabilities.
• Keep open dialogue — major decisions often need to be revisited multiple times as circumstances evolve.

Selling your business is one of the most significant financial decisions you’ll ever make, financially and emotionally.

Whether your transaction is a well-planned milestone or an unexpected opportunity, the earlier you align your financial, legal, and personal goals, the more likely you are to keep more of what you’ve built. In both retirement-focused and next-venture scenarios, a strong proactive tax strategy can turn a good deal into a great one.

If you’re planning a business sale in 2025, connect with a CBIZ professional today to ensure your strategy protects your proceeds and minimizes tax pitfalls.