One of the questions I hear most often from business owners is:
“How much am I going to pay in taxes when I sell my business?”
It’s a fair question…
But the problem is most owners ask it too late.
By the time they get around to this question… which is usually after an LOI is already signed…
some of the best planning moves are already off the table.
And what I’ve noticed after years around founder-led businesses, is that owners tend to focus
on the sale price.
They want to know what the company is worth, what multiple they might get, who the buyers
are, and what kind of offer is realistic.
All fair questions…
But there’s another number worth just as much attention.
What do you actually keep?
Because the same business, sold at the same price, can leave two different owners with two
very different after-tax outcomes.
I’ve seen two owners sell for roughly the same valuation, and one walked away with significantly
more wealth than the other.
He didn’t negotiate a better price, or find a better buyer…
He simply started planning earlier.
The tax bill attached to a business sale isn’t a fixed number. It’s shaped by decisions made well
before the sale ever happens.
And that’s where a lot of owners get caught off guard.
Hi, I’m Ryan Guth. I work with business owners thinking through major liquidity events, and one
thing I spend a lot of time helping people understand is that the transaction itself is only one part
of the equation.
Structure, timing, tax planning, estate planning, and personal planning shape the outcome just
as much as the sale price does.
In this video, I’m going to walk through what actually drives your tax bill when you sell, and why
so many owners leave money on the table simply because they started thinking about this too
late.
And, if you’re already wondering how this applies to your own business, I’ve included a link in
the description where you can schedule a free consultation. No pitch, just a quick conversation
about your specific situation.
Ok, let’s start with the single biggest lever…
THE STRUCTURE OF THE DEAL
Most owners are surprised to learn that not every dollar from a business sale gets taxed the
same way.
The biggest driver of that is whether the transaction is structured as an asset sale or a stock
sale.
Generally speaking, buyers tend to prefer asset deals.
Sellers tend to do better in stock deals.
Now, that’s a simplification, and every transaction is different…
But buyers often like asset deals because they can pick up certain tax benefits and avoid
inheriting certain liabilities.
Sellers often prefer stock deals because more of the proceeds may qualify for favorable capital
gains treatment.
The point isn’t that one is always better than the other…
The point is that it’s negotiable.
Many owners assume the structure is just handed to them.
In reality, it’s often one of the biggest conversations happening during the deal process.
And if nobody’s evaluating the tax implications alongside the legal and financial ones, it’s
easy to leave money on the table.
Ok, next up is…
ENTITY TYPE
A C-Corporation can produce a very different tax bill than an S-Corporation or an LLC.
C-corp owners run the risk of double taxation… the same dollar getting taxed once at the
corporate level and again at the shareholder level.
Pass-through entities, like S-corps and LLCs, generally avoid that.
Entity structure shapes the outcome. And changing entity structures, if it’s appropriate,
usually takes years of lead time, not weeks.
This is why timing plays such a big role.
A lot of owners think tax planning starts when they receive a Letter of Intent.
But in reality, that’s often when a lot of the planning opportunities start disappearing.
Next, there’s…
THE PROCEEDS THEMSELVES
This is something else that surprises many owners…
Not all of the sale price gets taxed the same way.
Some may qualify for capital gains treatment. Some gets taxed as ordinary income.
There’s also something called Depreciation recapture: deductions you took over the years
coming back at the sale, often taxed at higher ordinary rates than the rest of the gain.
Owners sometimes estimate their tax bill off the headline capital gains rate, then find out the
real number looks pretty different.
There’s also purchase price allocation. This one rarely comes up outside deal circles, but it can
shape what an owner actually keeps.
Buyers and sellers often want different things when it comes to how the price gets allocated
across asset classes, and that allocation drives the tax treatment of the proceeds.
So, the conversation isn’t just about the total purchase price, it’s about how the deal is built
underneath it.
Then there are the additional layers:
Federal capital gains taxes..
The 3.8% Net Investment Income Tax (Thanks, Obama), which stacks on top of your capital
gains rather than replacing it…
And depending on your situation, there may be state taxes owed in places you didn’t expect.
For example, I work with some owners in Tennessee, where there’s no state income tax. But
that doesn’t automatically mean a seller owes nothing at the state level.
If the business operates in another state and has a “tax nexus” in that state, that state can still
come looking for its share. For example, I have an office, clients, and employees in New
Mexico. So I pay Gross Receipts Tax on my New Mexico income. For me, and for a lot of
businesses, the good outweighs the bad.
What I’m getting at is that generic tax estimates can be misleading, every business has its own
quirks from a tax point of view.
If you’re starting to realize how many of these variables are still within your control, that’s exactly
the kind of thing worth talking through before a deal’s already in motion.
There’s a link in the description where you can schedule a free call… no pressure, just a real
conversation about where you stand.
Ok, now I’m going to give you a handful of planning strategies worth knowing about, depending
on your situation:
First, installment sales can spread the gain across multiple years, which can soften the bracket
impact instead of taking the full hit in one year.
Then, there’s charitable strategies that use a charitable remainder trust or a donor advised
fund. These can work well for owners who know their number and also have philanthropic goals
in mind.
Pre-sale trust and gifting strategies can move some of that gain into lower or no-tax
positions, but they need real runway to work, which is another reason early planning pays off.
And for a narrower group of owners, there may be benefits available through Qualified Small
Business Stock under Section 1202.
The rules around QSBS actually expanded in 2025…
Qualifying owners can now see tiered exclusions starting at a three-year hold, a per-issuer cap
that moved up to $15 million, and a gross asset ceiling that increased to $75 million.
But this only applies to qualifying C-corp stock, and eligibility comes down to specifics that are
worth checking with your team.
The point is, the details shape the outcome.
So does timing.
And so does planning.
Which brings me back to the original question…
How much will you pay in taxes when you sell your business?
The honest answer is…
It depends.
It depends on the deal structure. Your entity type. Your state. Your basis. Your planning. And how early you start.
The biggest mistake isn’t paying taxes… taxes are part of a good outcome.
The biggest mistake is assuming the number is fixed, when most of the variables are
actually still in your control.
That’s why I think owners should start these conversations years before they think they’ll
need to, with an advisor like myself, a CPA, and an attorney coordinating together instead of
working in separate silos.
The best planning happens now.
So, if your business is generating a million dollars or more in annual profit, and you’ve started
thinking about what an eventual exit might look like, it’s time to start asking these questions.
Not when the Letter of Intent shows up. Please no.
Not when due diligence begins.
And not when everyone’s working against a deadline.
Now.
Because the real goal isn’t to sell your business…
The real goal is what’s on the other side of the exit. What you’ll actually keep, and how that
supports the life you’re trying to build.
So, if you’d like help thinking through that, click the link in the description where you can
schedule a free call now.
There’s no pressure, and no obligation… just a chance to look at the moving pieces while
they’re still easy to move.
Thanks for watching, and I’ll see you in the next one.