You can take it with you: Five tax tips before selling your business

Key points

• Nearly half of professional advisors say clients spend too little time on tax and wealth transfer planning.
• Michael Paulus said he lost hundreds of millions in tax savings when selling his first business.
• The QSBS exclusion was raised to $15 million for stock issued after July 4, 2025.

Many entrepreneurs treat tax planning as an afterthought when selling their businesses. A recent BNY Wealth survey found that 45% of professional advisors say their clients spend too little time on tax and wealth transfer planning.

Michael Paulus, founder of wealth advisory PCM Encore, told CNBC he left hundreds of millions of dollars on the table when he sold his first business, insurance tech firm Assurance IQ, for $2.4 billion in 2019. He said the ideal time to start planning is two to three years before going to market.

Key tax strategies

Lawyer Edward Renn of Withers said many founders do not realize they may qualify for the qualified small business stock (QSBS) exclusion. The exemption reduces capital gains taxes on stock directly acquired from a qualifying C corp and held for more than five years. The One Big Beautiful Bill Act raised the maximum exclusion to $15 million for stock issued after July 4, 2025, and allowed partial benefits after three or four years. Renn said manufacturing, retail and technology businesses often qualify, but healthcare and accounting are excluded.

Brian Gray, CPA at Gursey Schneider, said owners can gift QSBS to non-grantor trusts to multiply deductions. Jordana Schreiber, partner at Day Pitney, said gifting minority interests well before a sale can leverage valuation discounts of 20% to 35%. Paulus warned that donating stock too close to a sale may cause the IRS to treat it as a deemed sale, triggering capital gains tax.

The reality is the perfect time would be two to three years before you're contemplating going to market

— Michael Paulus

Residency and liquidity

Schreiber said changing residency for tax purposes is harder than just spending more than half the year in another state. She said continuing to own a home or run a business in the original state makes it harder to prove a change of domicile. She added that updating a driver's license, voter registration and other ties to the new state can help.

Brian Haloosim, president of Lido Advisors, said business owners should assess liquidity needs before parting with equity. He said many underestimate how much they will need once the business is sold. Paulus recommended small steps, such as transferring some equity to a spousal lifetime access trust, rather than delaying planning altogether.