最新糖心Vlog

Timing the Sale: Part 5 of 6
Tax Policy, Election Cycles, and Exit Planning for Business Owners

Quick Answer: What should business owners ask their CPA before selling?

Before selling a business, owners should ask their CPA how the transaction may be taxed, whether the sale is likely to create capital gain or ordinary income, how entity structure affects the outcome, whether an asset sale or stock sale is likely, what happens to debt at closing, how depreciation recapture may apply, how seller notes or earnouts may be taxed, and what the owner may actually keep after taxes, debt payoff, working capital requirements, and transaction costs.

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Expert Contribution & Review
This article includes insights from and was reviewed for technical accuracy by , South Atlantic Regional Leader at .

Last reviewed: September 2026
Reviewed by: John Bly, CPA, CVA, CM&AA, CGMA

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Many business owners focus on the sale price.

That is understandable. Valuation matters. Purchase price matters. But the number at the top of the letter of intent is not the same as what the owner keeps after closing. That difference is where tax planning becomes critical.

For owners considering a sale in the next few years, the tax conversation should not begin after a buyer is found. It should begin before going to market, while there is still time to understand structure, model different outcomes, coordinate advisors, and avoid preventable surprises.

, South Atlantic Regional Leader at and a CPA who advises business owners on transaction planning, said many owners wait too long to prepare. In his experience, roughly 80% of business owners are unprepared for the tax side of a transaction when they first begin thinking seriously about selling.

That does not mean they are careless. Most lower-middle-market owners are focused on running the business, managing employees, serving customers, and growing the company. But when a sale becomes real, the tax impact can be one of the biggest surprises in the process.

Sale price is not the same as net proceeds

One of the most important financial questions an owner can ask before selling is, “How much will I actually keep?”

A business owner may hear a purchase price of $5 million, $10 million, or $15 million and assume that number tells the whole story. It does not. Net proceeds may be affected by:

• Taxes
• Debt payoff
• Transaction fees
• Working capital requirements
• Escrows
• Seller notes
• Earnouts
• Rollover equity
• Purchase price allocation
• State taxes
• The owner鈥檚 basis in the business
• The timing of payments

Bly said owners often miss the full economic picture. 鈥淭hey think, 鈥業鈥檓 selling for $5 million, $10 million, $15 million,鈥� and they haven鈥檛 thought through the various steps and the subsequent tax ramifications,鈥� he said.

Debt is one of the most common areas of confusion. Owners may assume they can subtract debt payoff from the sale price and then pay taxes only on the remainder. But that is not usually how tax is calculated.

鈥淒ebt may have to be paid off at closing, but that does not necessarily reduce taxable income from the sale. It doesn鈥檛 subtract and then subtract again,鈥� Bly explained. 鈥淵ou鈥檙e subtracting the debt, but the taxes are on the gross amount essentially.鈥�

Gross proceeds and net proceeds are not the same. The top-line number matters, but the bottom-line outcome matters more.

What tax questions should owners ask before going to market?

Before going to market, owners should work with their CPA and advisory team to understand the likely tax treatment of a sale.

Key questions include:

• Is the sale likely to generate capital gains, ordinary income, or both?
• How long have I owned the business?
• What is my tax basis?
• Does Section 1202 qualified small business stock treatment apply?
• How does my entity structure affect the sale?
• Is the transaction likely to be an asset sale or a stock sale?
• What assets will transfer to the buyer?
• What assets, cash, receivables, or real estate may I keep?
• How will inventory, accounts receivable, equipment, and goodwill be treated?
• Will depreciation recapture create ordinary income?
• How will seller financing, earnouts, or installment payments be taxed?
• How could state taxes affect my net proceeds?
• What planning should happen with my attorney and wealth advisor before closing?

Bly emphasized that the owner鈥檚 advisory team matters. The CPA, attorney, financial advisor, and M&A advisor should all be involved so the owner can evaluate the tax treatment, legal structure, market strategy, and personal financial impact together.

The tax answer is not isolated from the rest of the deal. Structure, timing, financing, and transition expectations all affect the owner鈥檚 outcome.

Why tax modeling should happen before a letter of intent

Tax modeling is most useful before a letter of intent (LOI) is signed.

Once an LOI is in place, the major deal terms have usually started to form. The purchase price, structure, financing assumptions, transition expectations, and timing may already be moving in a specific direction. At that point, planning options may be more limited.

鈥淚n an ideal world, [tax modeling] should happen a year or two before,鈥� Bly said. 鈥淭he owner needs to understand what the economic effects are.鈥�

And that modeling should go beyond taxes alone. Owners also need to understand which assets are selling, which assets they keep, whether debt must be paid off, what working capital remains in the business, and how the after-tax proceeds align with retirement, reinvestment, estate planning, or other personal goals.

This is also where a financial advisor or wealth manager can help. If an owner is counting on a specific amount to fund retirement or the next chapter, they need to know whether the likely net proceeds support that plan before the transaction is already underway.

Asset sale vs. stock sale

Many owners search for information about asset sales versus stock sales as though they can simply choose the option they prefer. In reality, the seller does not always control that decision. Bly explained that a stock sale can sometimes create a more favorable tax result and a cleaner transfer of ownership for a seller. But in the lower middle market, buyers often prefer, and may insist on, an asset sale.

For sellers, the tax result can differ significantly depending on entity structure, asset allocation, and deal terms. But tax treatment cannot be evaluated in isolation. A seller may prefer a stock sale from a tax standpoint, while a buyer in the lower middle market may insist on an asset sale to limit inherited liabilities and create future tax benefits.

An experienced advisory team can help bridge that gap by negotiating allocation, structure, transition terms, seller protections, and other deal points in a way that protects the seller鈥檚 interests while still giving the buyer a transaction they can accept.

Common tax surprises when selling a business

Several tax surprises tend to catch owners off guard.

鈥淚鈥檇 say the first surprise is assuming the entire sale will be taxed as capital gain, but it usually is not,鈥� Bly said. In many asset sales, some portion of the transaction may be treated as ordinary income. That may include inventory, accounts receivable, and depreciated assets.

Depreciation recapture can be especially surprising. For example, a business may have purchased equipment, vehicles, or machinery and taken accelerated depreciation. Owners may forget they received an ordinary deduction when they depreciated the equipment. So, while they may have reduced taxable income in prior years, when those assets are sold, some of the gain may be recognized as ordinary income.

Other common surprises include:

• Debt payoff does not necessarily reduce taxable income.
• Working capital may need to remain in the business.
• Inventory and receivables may create ordinary income.
• Seller notes, earnouts, and other forms of seller financing can affect timing, risk, and net proceeds.
• Some proceeds may not be received at closing.
• State taxes may affect the outcome.

The lesson: owners should work with their CPA to understand the math before making decisions.

How policy uncertainty affects tax planning

Tax policy can influence sale timing, but owners should avoid making decisions based only on speculation.

Bly said modeling future tax changes can be difficult because it depends partly on what the owner believes may happen politically and economically.

鈥淲e aren鈥檛 in the practice of predicting where future tax rates will go,鈥� Bly said. 鈥淏ut if a client thinks a certain candidate is definitely going to win, then we can help them understand what that candidate鈥檚 strategy is.鈥�

The role of the CPA is not to predict elections. It is to help owners model scenarios. For example, an owner may want to compare what happens if a sale closes under current tax rules versus a possible future tax environment. They may also need to think through the timing of seller notes, installment payments, or earnouts. In some cases, the timing of income recognition may matter if tax rates change later.

Tax policy should not drive the entire sale decision, but owners should understand how different scenarios could affect net proceeds. For most founders, tax policy is one factor among many. Business readiness, buyer fit, employee treatment, deal structure, certainty of closing, and personal goals all matter.

How the CPA, M&A advisor, attorney, and financial advisor work together

A successful sale usually requires more than one advisor.

The M&A advisor helps with valuation, positioning, buyer outreach, negotiation, process management, and deal structure. The CPA helps model tax impact and interpret the tax consequences of structure, timing, and allocation. The attorney handles legal documents, risk allocation, and transaction terms. The financial advisor helps the owner plan for liquidity, income needs, estate planning, and life after closing.

Ideally, that team should begin working together well before the business goes to market. Jay Offerdahl, 最新糖心Vlog President, said at least 12 months of lead time is ideal when possible. That gives owners time to evaluate tax strategy, income planning, depreciation decisions, retirement contributions, and other planning opportunities before the sale year.

Owners should also be thoughtful about the role of their existing accountant. A long-time accountant may know the business history better than anyone, and that context can be extremely valuable during a sale. But M&A tax planning is different from preparing annual returns. If the accountant does not regularly advise on business sales, the owner may need to bring in additional transaction-specific tax expertise.

That does not mean replacing the accountant who knows the business. It means building the right advisory team around the owner before major decisions are made. The earlier the CPA, attorney, financial advisor, and M&A advisor are aligned, the better chance the owner has of understanding the tax impact, negotiating the right structure, and avoiding decisions that are difficult to unwind later.

Start the tax conversation before the sale feels urgent

Waiting until a buyer is at the table before asking tax questions is a very risky approach.

Instead, start early with education, modeling, and coordination. Understand the likely value of the business. Understand what a buyer may want to purchase. Understand how entity structure affects the outcome. Understand how debt, working capital, depreciation, inventory, and receivables may affect net proceeds. Understand what role taxes should play in timing.

Most importantly, understand what the sale needs to accomplish for you personally. Selling a business is not only about what the buyer pays. It is about what the owner keeps, what risks remain, and whether the deal supports the owner鈥檚 next chapter.

The earlier you ask the right tax questions, the more prepared you will be to make decisions when the market, a buyer, or a policy change brings timing into focus.

Frequently Asked Questions

About the Contributor

, is the South Atlantic Regional Leader at . He leads a team of 100+ advisors across Aprio鈥檚 North Carolina offices and works closely with CEOs and business owners on mergers and acquisitions, business valuation, tax strategy, and growth planning. Before joining Aprio, John founded Bly & Bly CPA and grew the firm through a combination of organic growth and 14 mergers and acquisitions before combining with Aprio. He holds a Master of Science in Taxation from the University of Denver and is certified in business valuation and mergers and acquisitions advisement.

Editor鈥檚 note/disclaimer: This article is for educational purposes only and should not be considered tax, legal, accounting, or financial advice. Business owners should consult their CPA, attorney, and financial advisor before making decisions related to a business sale.

Continue the series:
Previous: What Lenders Watch During Election-Year M&A
Next: If You Want to Sell by 2028, When Should You Start Preparing?