Business Exit Planning for Founders & Operators

Plan a tax-efficient business exit and post-sale income strategy. Fee-only fiduciary advice for founders and operators. Annapolis MD — virtual nationwide.

Most tax-efficient exit structures run on a multi-year clock. The owners who keep the most from a sale usually started planning three to five years before the letter of intent. The owners who call the week the LOI arrives still have options, but fewer of them, and the remaining options are smaller.

We are a fee-only fiduciary RIA. We do not broker your deal and we earn nothing from the transaction itself. Our seat is the personal balance sheet side of the sale: entity structure, QSBS qualification, estate moves made before the valuation is set, charitable funding done before the agreement binds, and a plan for the proceeds after the wire hits.

This is not for every household. Exit planning earns its fee when the likely sale price runs well into seven figures, or when QSBS, estate, or charitable mechanics are in play. Below that, a good transaction CPA may be all you need, and we will tell you so.

The exit clock: five years, three years, one year

Five years out is when the structural decisions get made. Whether the company should be a C corporation. Whether the QSBS holding period should start now. Whether owner compensation, personal expenses, and family payroll need to be normalized so the financials tell a clean story. These choices take years to pay off, which is why they cannot be made at the end.

Three years out, the work shifts to positioning. Gifts of company interests into trusts at today's valuation, before a buyer's offer resets what the IRS believes the business is worth. A quality-of-earnings dry run. Reducing the company's dependence on you personally, because buyers pay less for a business that walks out the door with its founder.

One year out is fine-tuning, not construction. Installment structure versus lump sum. Earn-out terms and how they will be taxed. Charitable funding completed before a binding agreement exists. State residency questions if a move is on the table. Real moves remain at one year, but the big levers have already been set or lost.

QSBS: the five-year clock inside the clock

Section 1202 of the tax code allows a seller of qualified small business stock to exclude gain up to the greater of $10 million or 10 times basis under the classic rules. The requirements are strict: the stock must be C corporation stock acquired at original issuance, the company must run an active qualified trade or business, the company's gross assets must sit under a statutory ceiling when the stock is issued, and you must hold the stock at least five years.

Legislation in 2025 adjusted the caps and holding tiers for newly issued stock, so the exact numbers depend on when your shares were issued. We confirm the figures with your transaction CPA before anyone relies on them. The mechanics, not the memorized numbers, are what matter here.

Two planning points follow from the mechanics. First, the clock starts at issuance, so an LLC considering C corporation conversion is deciding when its five years begin, and the conversion itself resets basis in ways that affect the 10x calculation. Second, QSBS only works in a stock sale. An asset sale forfeits it, which makes deal structure and QSBS a single conversation, not two.

Sources: 26 U.S. Code Section 1202, Cornell Law School

Deal structure changes your after-tax number

Buyers generally want asset sales: they get a stepped-up basis in what they bought and fresh depreciation. Sellers generally want stock sales: capital gain treatment, no corporate-level tax for a C corporation, and QSBS stays alive. The gap between those two positions is negotiated in price and in the purchase price allocation, where amounts assigned to consulting agreements and non-competes are taxed to you as ordinary income rather than capital gain.

An installment sale spreads gain across the years you actually receive payments. Spread correctly, it could potentially keep you out of top brackets and reduce exposure to the net investment income tax and Medicare premium surcharges in later years. The trade is credit risk: you are now your buyer's lender, and we underwrite that plainly before recommending it.

Earn-outs are contingent price. Structured as deferred purchase price they can carry capital treatment; tied to your continued employment they lean toward ordinary compensation income. We model both and we plan your household cash flow as if the earn-out pays zero, because a plan that requires the earn-out is not a plan.

Rollover equity means taking part of your price as stock in the buyer. Structured properly it can defer tax on the rolled portion, and it offers a second bite of the apple if the buyer sells again. It also means concentration in a company you no longer control. We size it against your balance sheet, not against the banker's enthusiasm.

Sources: IRS Topic No. 705, Installment Sales

Estate moves before the LOI

The window for wealth transfer closes when the letter of intent arrives, because the LOI puts a number on the business. Before that number exists, interests can be gifted or sold to trusts at appraised values that reflect a private, illiquid company. After it exists, the appraisal conversation changes entirely. This is why estate work belongs in the three-year window, not the final quarter.

The common tool is a grantor trust. You transfer interests to a trust for your family at today's valuation. Future appreciation, including the jump at sale, is designed to occur outside your taxable estate. Because you pay the trust's income taxes personally, the trust compounds without that drag, and the tax payments themselves are not treated as additional gifts.

These moves are irrevocable and they take months of appraisal and legal work. They are not for every household, and they only make sense when the estate math justifies them. We run that math first, then bring in estate counsel to draft. We do not draft documents ourselves.

Sources: IRS, Estate and Gift Taxes

Charitable structures, funded before the deal binds

If charitable giving is already part of your life, the year you sell is usually the year to fund it. A donor-advised fund funded with appreciated interests before a binding sale agreement is designed to produce a deduction at fair market value while the capital gain on the donated portion never lands on your return. Private interests need a qualified appraisal and the deduction rules are stricter than for public stock, so this takes lead time.

A charitable remainder trust takes the idea further. You contribute appreciated stock, the trust sells it without an immediate capital gain because the trust is tax-exempt, and you receive a payout stream for life or a term of years, taxed as the distributions come out. The remainder goes to charity, and you receive a partial deduction up front.

One honest caveat: timing is everything, and intent is everything. Fund these after the sale is effectively certain and the IRS can tax you on the gain anyway under the assignment of income doctrine. And the math never turns a gift into a profit. These structures reduce the cost of generosity you already intended. They do not manufacture wealth.

Sources: IRS, Charitable Remainder Trusts

The coordination seat

A well-run exit has an M&A attorney negotiating the purchase agreement and a transaction CPA modeling the tax. What most deals lack is anyone responsible for the seller's personal outcome. The attorney's client is the deal. The CPA's deliverable is the return. Nobody owns the question of whether the family is actually better off, in the right accounts, at the right risk, when it closes.

That is our seat. We keep the QSBS documentation, the trust funding timeline, the charitable deadline, and the proceeds plan on one calendar, and we make sure the attorney and the CPA are working from the same assumptions. When the purchase price allocation shifts in a late draft, someone has to notice what it does to your personal number. We notice.

The work does not end at the wire. Proceeds need a plan before they arrive: how much stays liquid while decisions settle, how rollover equity gets sized, how the concentration winds down, and how the sale becomes the retirement income it was always for. We custody client assets at Altruist and Charles Schwab, and the post-close plan is built there, not improvised.

Frequently Asked Questions

When should we start exit planning?

Three to five years before you expect to sell. Entity decisions and the QSBS holding period need that runway, and estate moves work best before a buyer puts a number on the business. If you are closer than that, call anyway. There are still real moves at one year, and even between LOI and close. There are just fewer of them.

My company is an LLC. Can I still use QSBS?

Not as an LLC. Section 1202 applies to C corporation stock acquired at original issuance. An LLC can convert and start the five-year clock at conversion, and the basis reset at conversion affects the 10x calculation. Whether conversion is worth the ongoing C corporation tax cost depends on your timeline and profitability. Sometimes it is the wrong trade, and we will say so.

Is an earn-out good or bad for me?

Treat it as at-risk money. Negotiate metrics you can actually influence, understand whether it will be taxed as purchase price or as compensation, and build your household plan as if it pays nothing. If it pays, it is upside. If your retirement depends on it, the deal structure needs work before you sign.

Can I fund a donor-advised fund or CRT after signing the purchase agreement?

Timing is the whole game. Once the sale is effectively certain, the assignment of income doctrine can put the gain on your return even though the charity holds the shares. Charitable funding belongs before a binding commitment exists, which usually means weeks or months of lead time for appraisals. We calendar this early for exactly that reason.

Do you replace my M&A attorney or my CPA?

No. Your attorney negotiates the agreement and your CPA prepares the returns. We coordinate between them on your behalf and we own the personal side: the QSBS position, the trust and charitable timelines, and the plan for the proceeds. If you do not yet have deal counsel or a transaction CPA, we can introduce you to several and you choose.

How do you charge for exit planning?

We are fee-only fiduciaries. You pay us a flat planning fee, billed monthly in advance, and we earn nothing from the transaction, from any product, or from any referral. If you want to see whether the engagement makes sense, start with a complimentary conversation through our contact page.