Preparing for the Sale of Your Business: A Timeline
For owners of family businesses and closely held companies, the prospect of selling to generate liquidity can be both exhilarating and daunting. The stakes are significant, involving both financial and emotional considerations. Thoughtful planning to clarify your goals for the company, yourself, and your family is essential for shaping a strategy that maximizes both the process and the outcome.
Personal Planning (should begin 6–12 months prior to sale)
Illustrative Proceeds Maximization Case Study - Proper planning allows for substantial tax savings
- Situation: Founder/shareholder to receive $100 million in proceeds from a transaction
- Objective: Intends to donate roughly one third to charity over lifetime, one third to children
1) Assumes shareholder has $10mm basis in company and value of $100mm at the time of the transaction. Also assumes that shareholder has $15million in other assets.
2) Assumes 20% Long Term Gain Tax on $90 million plus Medicare Surtax at 3.8%. 3) 2024 estate tax exclusion amount is $13,610,000 per individual.
4) Assumes avoiding $27 million realized cap gain and obtaining a fair market value charitable deduction for 30% of company stock transferred to DAF pre transaction.
5) Post transaction value off stock transferred to Children’s trusts through a grantor retained annuity trust ($3mm pre-transaction value).
Sept 2024. This information has been prepared for informational purposes and is not intended to provide, nor should it be relied on for, accounting, legal, tax, or investment advice. Please consult with your tax and/or legal advisor regarding your individual circumstances.