We want to start our exit runway, but we do not know how to structure our corporate entity to minimize our tax liability when we finally sell. How do we handle this before we engage brokers?

Question

Tyler Smith · Accepted Answer

The structural and legal setup of your company determines how much of the purchase price you actually keep. If you wait until you have a signed letter of intent to think about taxes, you will likely lose millions to unnecessary tax liabilities. You must address your corporate structure at least two to three years before you go to market. Begin by consulting with a specialized tax attorney and CPA to evaluate your current entity type. If you are operating as an S-Corporation, you may qualify for specific tax exemptions, whereas a C-Corporation might offer opportunities under Section 1202 for Qualified Small Business Stock, which can exclude a massive portion of your capital gains from federal taxes. Use your structured Thinking Time to model different transaction structures, such as an asset sale versus a stock sale, to understand the net cash proceeds of each scenario. Aligning your legal structure early allows you to make necessary conversions without delaying a future transaction. By entering negotiations with a pre-optimized corporate structure, you protect your hard-earned wealth and ensure a clean, legally sound transfer of ownership.