While it all sounds good, business brokers will tell you that many business owners fail to optimize—and they sometimes even compromise—the value of their business’s proceeds by rushing the process, hastily determining an asking price, or not fully assessing the value of their business to a potential buyer. In their haste, owners often miss strategies that can deliver an improved post-sale result and a true reward for their years of work.
Waco Foundation offers insight and resources as you navigate the pre-sale preparation process acting in conjunction with your accountant, attorney, and other trusted advisors. This is especially true if your business has operated for many years and has accumulated significant unrealized capital gains in its valuation that are likely to be heavily taxed at the time of the sale.
Many closely-held business owners and their advisors may not be fully aware of the advantages of giving shares of the business to a nonprofit at the time of sale. Knowing the opportunities that exist well in advance of any external discussion about a potential sale of the business can enable business owners to achieve their financial and charitable goals at the same time. With prudent planning, the gifted shares will be free of capital gains at sale time, allowing the proceeds to flow to a nonprofit, meeting the business owner’s charitable goals. The business owner also benefits from a reduced value of their taxable estate. This can have huge repercussions given the anticipated reduction of the estate tax exemption slated for 2025.
Critically important to successfully executing this strategy is to ensure that business owners avoid any preliminary discussions about the sale, especially negotiations, before consulting with advisors, like Waco Foundation early on. Otherwise, the sale might get caught in the IRS’s step-transaction trap, a risk with any pre-sale gift to charity of real estate, closely-held stock, or other alternative asset. The devil truly is in the details!
For those that like to delve deep into tax law, consider reviewing the issues related to the business itself supporting charitable causes, totally unrelated to its eventual sale.
Reach out to Planned Giving Director Jamie Goble at firstname.lastname@example.org or (254)754-3404 if you own a business or advise business owners to explore the idea of potentially giving a portion of the business to a McLennan County nonprofit. We work alongside you to help optimize the exit and maximize the resulting proceeds.