Back to InsightsBy Tom Burt, Managing Partner & Senior Portfolio Manager
For many business owners, a liquidity event is not just a transaction.
It represents years – often decades – of dedication and hard work. Long days, difficult decisions, risks taken, and the responsibility of others depending on you. As an owner, your business becomes more than an asset – it reflects your life’s effort and a set of decisions that have shaped both financial and personal outcomes. For many owners, it is deeply personal — something built over time, not easily separated from their identity.
When conversations emerge about a potential sale, the focus naturally turns to value. What is the business worth? What will the proceeds be? And how can those proceeds support your life and legacy?
What ultimately determines the outcome is how well prepared you are — particularly when it comes to how the transaction is structured and taxed, both before the sale and in the years that follow. When so much has gone into building a business, it becomes even more important to be thoughtful about what is kept – and how it is used going forward.
Planning Ahead: Where Tax Strategy Begins
A successful liquidity event is often measured by price. In practice, what you keep matters just as much.
Taxes play a central role in that equation. For many owners, this is about protecting the value of years of effort, not just optimizing a transaction.
Disciplined planning can meaningfully improve after-tax outcomes. Without it, a significant portion of value can be lost because key decisions are made too late or without a broader plan in place.
The most effective tax strategies begin well before a sale is imminent. In many cases, the difference in after-tax outcomes can be substantial depending on decisions made well in advance.
The structure of the business, ownership dynamics, and the timing of the transaction can all influence the tax treatment of proceeds. In some cases, planning done years in advance can create opportunities that are not available later.
Areas that often warrant early attention include:
- Entity structure and eligibility for favorable capital gains treatment
- Qualified Small Business Stock (QSBS) considerations, where applicable
- Gifting or transferring shares to family members or trusts ahead of a sale
- State and residency planning, particularly for owners with flexibility around domicile
- Charitable strategies, such as donor-advised funds or trusts, that can reduce taxable income
These decisions are highly specific to each situation. What matters most is that they are considered early enough to be effective.
Managing the Transaction Itself
As a transaction approaches, the focus shifts to how the deal is structured.
Purchase price allocations, the mix of cash and equity, and the timing of payments can all affect the tax outcome. Even within the terms of a negotiated deal, there is often room to shape how proceeds are treated. Whether proceeds are treated as capital gains or ordinary income, and how those amounts are recognized over time, can materially change what is ultimately retained.
Coordination across investment bankers, attorneys, accountants, and advisors is critical. A clear, unified plan helps preserve value and identify tax-effective opportunities.
The goal is to close the transaction in a way that reflects the full value of what has been built.
After the Sale: Turning Proceeds into Possibility
The period after a liquidity event is often overlooked in planning conversations. In reality, it is where many of the most important decisions begin.
A previously illiquid asset has been replaced with liquidity – a shift that brings both opportunity and complexity.
- How should the proceeds be invested?
- What level of spending is sustainable?
- How should risk be managed going forward?
- What role should legacy or philanthropy play?
Tax considerations remain central at this stage. How proceeds are invested, how income is generated, and how assets are structured can all influence long-term tax efficiency and the ability to preserve wealth over time.
A Defining Moment
Selling a business is one of the most significant moments in an owner’s life.
Financially, it creates liquidity that represents the culmination of a lifetime of hard work.
Personally, it offers a unique moment to consider what comes next after years building, growing, and carrying the responsibility of the business.
For some, that may mean new ventures or investments. For others, it may mean more time with family, philanthropic work, or simply the ability to step back and make decisions with greater flexibility.
Preparing for it requires a complete perspective beyond the transaction price – one that brings together tax strategy, investment planning, and a clear understanding of what the next chapter should look like.