Good tax planning before selling a business isn’t a closing-week task, the strategies that actually save money need months of lead time to work.
Quick Answer: The 12-Month Tax Planning Timeline
Effective tax planning before selling a business starts about 12 months out: reviewing entity structure and QSBS eligibility early, addressing S-corp conversion timing by month 9, evaluating installment sale and deal structure options by month 6, and finalizing everything with your CPA and attorney in the final 3 months before closing.
12 Months Out: Engage a CPA and Review Structure
This is the point to review entity structure (see our S-Corp vs C-Corp guide) and check QSBS eligibility, since both involve decisions that need lead time to matter.
9 Months Out: Address Structural Timing
If an entity conversion is being considered, this is roughly the latest point where the built-in gains 5-year clock still has time to matter for many transaction timelines, though the specific math depends on your situation.
6 Months Out: Evaluate Deal Structure Options
Consider asset sale vs entity sale implications, and whether an installment sale structure could help spread out your tax liability.
3 Months Out: Finalize With Your Advisors
By this point, your CPA and attorney should be finalizing the specific structure, and your due diligence documents should be in order so tax questions don’t surface late in the process.
At Closing: Execute the Plan
The final structure gets documented in the purchase agreement and executed, this is not the time to be revisiting tax strategy for the first time. Keeping organized records throughout this timeline, per the IRS recordkeeping guidelines, makes every step of this process faster.
FAQ
What if I’m already under contract and haven’t done any of this? Some options may be limited, but a CPA can still often help minimize your tax bill, earlier is better, but it’s not too late to get advice.
Do I need both a CPA and an attorney? For most business sales, yes, tax strategy and legal deal structure are closely linked and benefit from both perspectives.
Does this timeline apply to every business size? The principles apply broadly, but larger or more complex sales may need an even longer runway for some strategies.
What’s the most commonly missed step on this timeline? QSBS eligibility and entity structure review, both are often only considered at the moment of sale, when it’s too late for some strategies to help.
Should my broker be involved in this planning? Yes, a broker who’s coordinating your sale should be working alongside your CPA and attorney throughout this timeline, not just at closing.
Not sure where you are on this timeline? Talk to Truforte Business Group.