Key considerations before exiting your business

The best time to begin planning for the transition of your business was when it’s founded, but the second-best time is now. All business owners will eventually transition their business, whether by choice or necessity and whether they have planned for the transition or not. The most successful transitions are those where the owner started planning sooner rather than later and treated planning as a business strategy rather than an ending event. Regardless of where you’re at in this process, below are key considerations.

Build Your Advisory Team

You know your business inside and out, but it is imperative to surround yourself early on with the right team of advisors who specialize in the various components of succession and wealth planning. No single advisor has all the necessary expertise to guide you down the right path, but the appropriate team of experts can identify and map out the complexities and bring objectivity to what can be personally and emotionally challenging decisions. This team often consists of the following:

  • Investment Banker
  • CPA
  • Valuation Expert
  • Wealth Advisor
  • Business M&A Attorney
  • Insurance Advisor
  • Commercial Banker
  • Estate Planning Attorney

Tax Planning

There are two main types of taxes for a business owner to consider:

Income Taxes

These taxes include such things as ordinary income tax and capital gains tax. How a potential transaction is structured can dramatically affect the amount of tax paid upon a sale.

Gift and Estate Taxes

In 2023, the gift and estate tax exemption amount is $12.92 million per individual (or double that amount for a married couple). In general, transfers of wealth, whether made during your lifetime or upon your death, that exceed your exemption amount will be taxed at 40%. Many business owners consider using some or all their gift and estate tax exemption amount to transfer ownership interests in their business to family through the use of specialized trusts and valuation discounts, which can result in a significant increase in the amount of wealth that ultimately passes to family members and others. 

Estate Planning

You may have completed very little estate planning or extensive estate planning, but have you considered how your business interest factored into your plan? Do you intend to transition the business or wealth to the next generation (and, if so, is the next generation ready and willing to run the business)? Or would it make more sense to sell the business and ultimately pass liquidity to your loved ones? Understanding the options you have as a business owner to utilize estate planning techniques (including various trusts and through the use of valuation discounts discussed above) can optimize the financial outcome for your family, especially if done well in advance of transitioning the business. Your estate planning wishes can evolve over time as your business grows, your family develops, and laws change. It is important to review your estate planning documents periodically (at least every three to five years) to make sure they continue to carry out your wishes in an efficient and effective manner.

Family Governance

For an owner with family members working in the business, having conversations around goals and expectations well in advance of a transition will be a key planning component. Many business owners also express a concern with coming into liquidity and how their children and future generations will handle such wealth. Through proactive personal planning and next-generation education, this wealth can be managed through the use of family trusts and other planning vehicles that not only provide potential tax advantages but also protect such liquidity from spendthrift children and their creditors. 

Philanthropic Planning

In the year of a business sale, there will be a higher-than-usual income tax liability. If you are charitably inclined, this is a key time to consider larger charitable giving to maximize the tax advantages associated with such donations. This can be accomplished through donor advised funds, private foundations, and charitable trusts. Each charitable vehicle has different timing and complexity, and offers different tax advantages, so each option should be carefully considered and discussed to optimize the outcome for your family and the charity.

Headshot of Morgan Luddeke

Morgan Luddeke

Senior Vice President, Director, Business Transition Advisor

Fifth Third Bank

Headshot of Sean Obermeyer

Sean Obermeyer

Vice President, Director, Business Transition Advisor

Fifth Third Bank

About the Goering Center for Family & Private Business

Established in 1989, the Goering Center serves more than 400 member companies, making it North America’s largest university-based educational non-profit center for family and private businesses. The Center’s mission is to nurture and educate family and private businesses to drive a vibrant economy. Affiliation with the Carl H. Lindner College of Business at the University of Cincinnati provides access to a vast resource of business programing and expertise. Goering Center members receive real-world insights that enlighten, strengthen and prolong family and private business success. For more information on the Center, participation and membership visit

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