Thinking of Selling Your Business? 2 Steps to Get the Best Price
Here's what could be the difference between a lucrative outcome and disappointment for business owners now.

Throughout the country, hundreds of thousands of business owners are struggling to cope with the massive impact of the coronavirus shutdown.
Most will soldier on, helped by the government’s relief measures, but a minority will likely decide that it’s time to cash out and sell all or part of the business.
For some, securing outside funding through an equity sale may be the only way to survive. For others, the pandemic and looming recession may have accelerated their timelines for moving on to something else.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Whatever the reason, owners shouldn’t underestimate the importance of having a smart tax strategy in the run-up to a sale. While tax problems rarely sink deals entirely, in my experience they often cause unnecessary headaches and can result in substantially less money in owners’ pockets than would otherwise have been the case.
Step 1: To Get a Better Price, Get Your Taxes in Order
Broadly, there are two key elements of tax planning for a sale. The first is getting your own tax house in order. The second is ensuring that the sale results in the most advantageous tax treatment possible for you.
Too often, owners don’t think seriously about cleaning up their tax situation until negotiations over a sale have already started. By that time, it’s too late to fix much, which puts them at a disadvantage.
From a buyer’s point of view, a business with a messy or opaque tax situation raises an immediate red flag that could encourage them to offer a much lower price. It’s like buying a car without having had the chance to properly inspect the engine. You might still buy it, but you’d want a discount big enough to cover the risk of unseen problems.
That’s why it’s vital for owners to stay on top of their taxes. It’s easy to take shortcuts or get behind on payments and filings, especially in current conditions when it may not seem like a big priority. Maybe you should have been filing income or franchise taxes in more states, owe sales tax, or have foreign subsidiaries with outstanding tax obligations.
These misses are problematic in normal times, but they can become much bigger issues in a sale by undermining a buyer’s confidence in what they’re getting. Owners are often unprepared for detailed questions about their tax situations, even if they’ve been doing everything right, which can lead buyers to assume the worst and factor that into their offer price.
The good news is that sellers don’t necessarily have to fix all their tax issues. Some things can be resolved relatively quickly by catching up on state filings or filing amended returns. But the most important thing is to be able to identify an issue and put clear boundaries around it to reassure buyers that any problems are limited to a particular dollar amount. That may still result in a discount on the sales price, but a much smaller one than if the issue was a black box.
Step 2: Find the Right Type of Sale to Put More Money in Your Pocket
Early preparation is equally important when it comes to optimizing the tax outcome of a sale. If you don’t think about this until you’re in the thick of negotiations, it can be hard and potentially costly to backtrack.
It’s worth taking the time before the sales process begins to research what the most common transaction structures in your industry look like and what will result in the least amount of tax. Certain types of buyers, such as private equity funds, often have common structures that they prefer as well.
In most cases an equity sale will benefit a seller more than selling the business’ underlying assets. That tends to be less advantageous to the buyer, though. In general, the more that sale proceeds are treated as capital gains income rather than ordinary income, the more you’ll get in your pocket because of the lower tax rate. That makes it worthwhile to analyze how the sale can be structured to create more capital gains income.
For example, that could be around how the purchase price is allocated across different assets, or how pools of assets are structured. In general, the buyer won’t care too much about this kind of tweaking as long as they get a stepped-up basis in the asset they can depreciate or amortize.
Even in challenging economic times like we are facing now, buyers are out there snapping up businesses. By following these two principles and having a coherent tax plan in place before a sale, owners can better define their goals and navigate negotiations to achieve the result they want.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Kurt Piwko is a partner at Plante Moran's National Tax Office. The National Tax Office is responsible for tracking and informing staff and clients of current tax developments and responsible for addressing emerging tax issues and other tax technical issues on a consulting basis.
-
Retire in the Canary Islands for Beaches and Natural Beauty
Retirees enjoy Spain's Canary Islands, where life can be as hectic or chilled as you like. The one constant will be almost year-round mild weather.
-
The '120 Minus You Rule' of Retirement
The '120 Minus You Rule' updates an older retirement rule, with a twist. Here's how this approach to retirement portfolio construction can work for you.
-
Five Questions to Help Ensure a Happy, Secure Retirement
You need to drill down to what you really want out of retirement. Then you can get down to the business of crafting a financial plan to make it happen.
-
I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
Learning good financial habits — building an emergency fund, paying down debt, saving consistently — gives you flexibility, options and a path to security.
-
How to Buy an Annuity Online (Without Regret)
You should never be rushed into buying an annuity. But now that they can be sold quickly and easily online, you need to be more alert than ever to pushy salesmanship. Here are four signs you're working online with a professional.
-
How Much Income Will an Indexed Annuity Get You? An Annuities Expert Lays Out the Numbers
Guaranteed lifetime income sounds great, but how much will it be? Several factors determine your future payout on indexed annuities with an income rider.
-
Financial Fact vs Fiction: Why Inflation Is Lower, But Prices Are Not
Do you think bonds protect you from stock losses? Are you confident your assets will go to your intended heirs if all you have is a will? Think again — and read on for other myths that could be leading you astray.
-
I'm a Personal Finance Expert: Here's the Truth About Using AI to Plan Your Retirement
AI can be a useful tool, but it often gets important financial information wrong. It also can't emulate the empathy, judgment and personal connection you can get with a human being.
-
You Don't Have to Be Wealthy to Need a Wealth Manager
Navigating complex financial decisions is hard on your own, no matter how much money you have. A wealth manager can provide comprehensive financial planning, investment management, risk management and more.
-
Despite Tariffs, These Investment Experts Are Bullish on European Equities
European equities were one of the better-performing investments during the first half of 2025. They could be a good long-term prospect for U.S. investors needing to diversify, according to these investment managers.