Major financial transitions usually begin with thoughtful planning, often long before the milestone itself. For business owners, preparing for a liquidity event is one of the most consequential transitions they’ll face.
The first installment of Navigating the Sale of Your Business Before, During, and Post focuses on pre-liquidity planning and the opportunities available to maximize the value of a future sale. In this video, Chris Brathwaite explores key considerations before a transaction, including evolving tax legislation, charitable giving strategies, and other decisions that can help business owners preserve more of the wealth they’ve built.
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For many business owners, a liquidity event—whether a sale, merger, or IPO—represents the culmination of years, perhaps decades, of dedication.
However, without strategic pre-liquidity planning, a significant portion of that realized value can be eroded by taxes. The difference between a good exit and a great one often comes down to the planning you do before the letter of intent is signed.
The landscape is constantly evolving for business owners. Recent changes in tax legislation have significantly reshaped the treatment of capital gains and deductions, introducing new opportunities and challenges for taxpayers. These updates often adjust thresholds, introduce tiered benefits, and expand eligibility criteria, creating a more dynamic framework for managing financial transactions.
One of the most powerful tools available to business owners is the Qualified Small Business Stock election, or QSBS. The QSBS exclusion on capital gains has increased from $10 million to $15 million, indexed for inflation.
Even if you haven’t held your stock for five years, the new tiered system allows for partial exclusions after just three or four years. Your William Blair wealth advisor can also explore "stacking" strategies—gifting shares to non-grantor trusts—to potentially multiply that exclusion limit for your family.
For those who engage in philanthropic efforts, the year of a liquidity event can present a great opportunity to prefund future giving. Synchronizing that funding with the transaction can allow you to harvest a significant income tax deduction in a year when you need it most.
Our wealth advisors and philanthropy experts work together and often recommend a strategy called "bunching." By front-loading several years of charitable contributions into a Donor-Advised Fund during a high-income year, you can maximize itemized deductions and offset the tax impact of the sale, all while creating a charitable legacy for future generations.
Finally, your state of residency when a transaction closes can be a significant factor. State-specific tax considerations can vary widely, and establishing residency in a tax-efficient jurisdiction before a sale requires careful planning, adherence to statutory rules, and time.
At William Blair, our professionals uniquely bridge the relationship between investment banking and private wealth management. We don’t just help you execute the transaction; we structure various aspects of your wealth to ensure the proceeds serve your long-term goals.
Your liquidity event is a milestone. Let’s ensure your plan is as successful as your business. Contact your William Blair wealth advisor today to start the conversation.