Carie Pace, Managing Partner at Alpina Tax & Accounting Services.
Most business owners think exit planning starts when a buyer shows up.
It doesn’t.
Your entity structure, tax strategy, and asset setup today will determine how much you actually keep when you sell.
The $1M+ Mistake: Asset Sale vs. Stock Sale
Every deal comes down to one question: asset sale or stock sale?
- Buyers prefer asset sales (better tax treatment for them)
- Sellers prefer stock sales (lower tax rates for you)
Why it matters:
- Stock sale → taxed at capital gains rates (~23.8%)
- Asset sale → can be taxed at ordinary income rates (up to 37%)
On a $10M deal, that difference can exceed $1.5M in taxes.
If you’re structured wrong going into a deal, you don’t get to fix it later.
The Overlooked Advantage: QSBS
If you’re a C-Corp, you may qualify for Section 1202 (QSBS).
Under Section 1202 Qualified Small Business Stock, you can exclude up to 100% of capital gains on a sale.
That means:
- $10M gain → potentially $0 federal tax
But there’s a catch:
- You must structure correctly from the start
- You must hold shares for 5+ years
- You must meet strict eligibility rules
Miss it early → lose it permanently.
Earnouts & Timing Can Cost You
Not every deal pays upfront.
- Earnouts (future performance payments) are taxed as ordinary income, not capital gains
- Installment sales spread income across years—but require planning
Poor structuring here can cost hundreds of thousands in unnecessary tax.
This isn’t a default decision. It’s a modeling decision.
What Buyers Actually Find
Before closing, buyers go deep into your business:
- 3–5 years of tax returns
- Entity structure
- Financial records
What they uncover directly impacts:
- Your valuation
- Deal structure
- Whether the deal happens at all
Common deal killers:
- Unfiled multi-state taxes
- Basis inconsistencies
- Personal expenses in the business
- Payroll tax issues
- Unreported income
These don’t just create problems.
They reduce your price or stop the deal entirely.
Exit Readiness Starts Now
The best deals aren’t negotiated.
They’re prepared years in advance.
Exit readiness means:
- Clean financials
- Optimized entity structure
- Documented, defensible tax positions
You will exit your business once.
The difference between keeping 70% and 50% isn’t the deal. It’s the planning you did before it.