Business Exit Planning: What to Do Before You Sell Your Business
If you’ve spent years building a business, eventually you may start thinking about what comes next. Maybe you’re ready to retire. Maybe you’ve received an offer from a buyer. Maybe you want to transition the business to your children or a key employee. Or maybe you’re not ready to leave yet, but you know you don’t want to run the business forever.
Whatever your reason, leaving a business you’ve built is a major transition. And while much of the conversation around business exits focuses on valuation, finding a buyer, and negotiating the sale, those are only part of the picture.
A successful business exit also requires planning for what happens to you, your family, and your assets after the business is gone. If your business represents a significant portion of your wealth, selling it can completely change your financial and estate-planning picture.
That’s why exit planning should start well before you sign the final paperwork. The earlier you begin, the more opportunities you have to make thoughtful decisions instead of trying to solve problems at the last minute.
Key Takeaways
- Start planning your exit 3–5 years before you expect to sell. This gives you time to address legal, financial, tax, and estate-planning issues without trying to solve everything during the transaction.
- A business sale affects more than the business. Selling can significantly change your family’s finances, your assets, and your estate plan.
- Review your estate plan before you sell. If your business is one of your largest assets, selling it may make your existing estate plan outdated.
- Have a plan for the proceeds. Think about how the wealth created by the sale will support your retirement, family, charitable goals, and future estate.
- Coordinate with the right professionals. Your business attorney, CPA, financial advisor, broker, and estate planning attorney may each have an important role.
- Update your estate plan after the sale. Once the transaction is complete, your assets and goals may look very different—and your plan should reflect that.
1. Start Planning Your Exit Before You’re Ready to Sell
One of the biggest mistakes business owners can make is waiting until they’re ready to sell before they start planning their exit.
Ideally, you should begin thinking seriously about your exit at least three to five years before you expect to sell. That isn’t a hard deadline, and every business is different. Some owners may need to start even earlier, particularly if there are complicated ownership arrangements, significant tax considerations, or substantial estate-planning issues to address. But three to five years gives you a useful planning window.
A business sale can take months or even years to prepare for. There may be ownership questions to resolve, agreements to review, financial and tax considerations to address, and decisions to make about what you want your life to look like afterward. Some of those decisions can have significant legal or financial consequences, and you don’t want to discover an issue after you’ve already found a buyer.
Starting early gives you time to ask better questions:
- Who do I want to sell or transfer the business to?
- What does my family need from the sale?
- How much do I need to retire comfortably?
- What happens to the business if I die or become incapacitated before the sale?
- Is my current estate plan still appropriate?
- What will happen to the wealth created by the sale?
- Are there steps I should take now that could make the eventual transition easier?
You don’t need to have every answer before you begin. The point of exit planning is to give yourself enough time to figure out the answers.
2. Understand What You’re Actually Selling
“Sell the business” sounds straightforward, but the legal structure of a business sale can vary considerably. Depending on the circumstances, you may be selling business assets, an ownership interest, or the business entity itself. The structure of the transaction can affect you, the buyer, and your family in different ways.
This is one reason business owners should bring the appropriate professionals into the conversation early. Your attorney, CPA or tax professional, financial advisor, and business broker or M&A advisor may each have a different role in the process.
You also need to understand how your current ownership structure fits into the sale. If your business interest is owned by a trust, shared with other owners, subject to a buy-sell agreement, or otherwise governed by existing documents, those arrangements may need to be reviewed before a transaction moves forward.
The goal isn’t to become an expert in every part of the transaction yourself. It’s to make sure you understand what you’re selling and that the legal documents surrounding your business and your family are consistent with your plans.
3. Review Your Estate Plan Before the Sale
For many business owners, the business is one of the largest assets they own. Your estate plan may have been created with that business in mind.
But what happens when you sell it?
The business interest may no longer be part of your estate, but the value doesn’t simply disappear. It may become cash, investments, real estate, or other assets. That can create an entirely different estate than the one your current plan was designed to address.
Before selling, review your estate plan with your attorney and ask whether it still reflects your goals.
That may include reviewing:
- Your revocable living trust and how business interests are addressed
- Your will and other estate-planning documents
- Beneficiary designations
- Powers of attorney
- Provisions for your spouse and children
- Plans for gifting or charitable giving
- How your assets would be handled if you died or became incapacitated during the sale
This is particularly important if the business makes up a substantial portion of your family’s wealth. An estate plan that worked well when most of your wealth was tied up in a business may need significant changes once that business is sold.
Your estate plan shouldn’t be built around an asset you’re about to sell.
Planning to sell or transition your business?
Your business exit and your estate plan should be working toward the same goals. Sage Estate & Business Law can help you review how a sale, succession, or ownership transition fits into the plan you’ve built for your family.
4. Have a Plan for the Proceeds
Selling a business can create a significant amount of wealth, but receiving the proceeds is not the end of the planning process. In many ways, it’s the beginning of a new one.
When you owned the business, your wealth may have been concentrated in a single asset that you actively managed. After the sale, you may suddenly have a very different collection of assets and a different set of financial goals.
Before the sale, start thinking about what you want the proceeds to accomplish.
For example, do you want the money to:
- Fund your retirement?
- Provide financial security for your spouse?
- Help your children or grandchildren?
- Be invested for long-term growth?
- Support charitable organizations?
- Be passed to the next generation?
- Purchase another business or investment?
- Provide a combination of these?
These aren’t just investment questions. They can also affect how your estate plan should be structured.
If your goal is to leave a significant inheritance to your children, for example, you may need a different plan than if your primary goal is to provide for yourself and your spouse during retirement. If you want to make substantial gifts after the sale, that should also be considered as part of the broader planning process.
The important thing is to avoid treating the sale proceeds as an afterthought. The money you receive from your business may become the foundation of your family’s financial and estate plan going forward.
5. Bring the Right Professionals to the Table
Selling a business is rarely a one-professional job. Different professionals can help you navigate different parts of the process, and good planning often means making sure those professionals are communicating with one another.
| Professional | What They May Help With |
|---|---|
| Business attorney | Transaction structure, contracts, negotiations, and other legal issues related to the sale |
| CPA or tax professional | Tax consequences and tax planning related to the transaction |
| Financial advisor | Managing and investing the proceeds and planning for your financial future |
| Business broker or M&A advisor | Finding buyers, valuation, and facilitating the transaction |
| Estate planning attorney | Trusts, beneficiaries, powers of attorney, and making sure the sale fits into your overall estate plan |
Your estate planning attorney may not be the person negotiating the purchase agreement, and your business broker isn’t going to replace your estate planning attorney. Each professional has a different job.
The important part is making sure the pieces fit together.
At Sage Estate & Business Law, our role is to help business owners think through the legal and estate-planning consequences of major transitions like a business sale. That means looking beyond the transaction itself and asking what the sale means for your family, your assets, and the plan you’ve built for the future.
6. Plan for What Happens If the Sale Doesn’t Go According to Plan
Even the best-planned business sale can take unexpected turns.
The transaction could take longer than expected. A buyer could back out. Negotiations could fall apart. Or something could happen to you while the sale is underway.
What happens if you become incapacitated while negotiating the sale? What happens if you die before the transaction closes? Who has the authority to act on your behalf? What happens to your ownership interest?
These aren’t fun questions, but they’re important ones.
A comprehensive estate plan can provide instructions for situations where you can’t make decisions yourself. Depending on your circumstances, that may include a revocable living trust, durable power of attorney, healthcare documents, and appropriate provisions for your business interests.
You don’t plan for these possibilities because you expect them to happen. You plan for them because a major transaction shouldn’t depend entirely on everything going exactly as expected.
7. Update Your Estate Plan After the Sale
Your planning shouldn’t stop once the sale closes.
In fact, the period immediately following a business sale can be one of the most important times to revisit your estate plan.
Your financial picture may look completely different. The business may no longer be part of your estate. Your assets may be significantly more valuable. Your retirement plans may have changed. You may have new goals for your children, grandchildren, or charitable giving.
That means the estate plan you had before the sale may no longer be the right plan afterward.
After the transaction, consider whether you need to update:
- Your trust
- Your will
- Beneficiary designations
- Powers of attorney
- Your plan for distributing assets
- Your gifting strategy
- Your plan for a surviving spouse
- Your overall estate plan based on your new level and type of wealth
Think of the business sale as a transition point. You spent years building the business. Now you need a plan for what that wealth is going to do for the rest of your life and for the people you care about.
8. Your Business Exit Is Also a Life Transition
It’s easy to think of selling a business as a financial transaction. In reality, it can be one of the biggest personal transitions you’ll ever make.
For years, your business may have provided your family’s income, occupied much of your time, and represented a significant part of your identity and your wealth. Walking away from it changes more than your balance sheet.
That’s why a good exit plan should answer more than “How do I sell my business?”
It should also help answer:
What happens to my family after I sell it?
What happens to the wealth I’ve spent decades building?
What do I want the next chapter of my life to look like?
How do I make sure my estate plan reflects the life I’m actually going to have—not the life I had before the sale?
Those questions are worth addressing before the transaction is complete, not after.
A Business Exit Is Only One Part of the Plan
Selling a business can be an exciting opportunity, but it also creates a number of legal and financial decisions that shouldn’t be left until the last minute.
Start early. Bring the right professionals into the process. Understand what you’re selling and what you’ll have afterward. Most importantly, make sure your business exit plan and your estate plan are working toward the same goals.
If you’re considering selling your business, transitioning ownership, or stepping away from a business you’ve spent years building, Sage Estate & Business Law can help you understand how that transition fits into your broader estate plan.
The goal isn’t simply to help you get to closing. It’s to help you make sure what happens after closing is just as carefully planned.