Strategies for Investing Prior to and Following the Sale of a Business

Thoughtful planning prior to the sale of a business can help business owners reduce taxes, broaden their investment exposure, and protect their long-term wealth.

There are many things for a business owner to consider prior to a business sale in order to ensure that they have set themselves up as best as possible for long-term success. Below are a few strategies to be aware of if you are a business owner preparing for the sale of your business:

Build a diversified investment portfolio while running your business.

When most of your wealth is tied up in a business, it often means your financial exposure is highly concentrated in a single industry or asset. Maintaining a public markets portfolio (a portfolio of publicly traded stocks and bonds) while you are operating your business can provide exposure to a wide range of industries. This can increase your overall diversification and reduce your concentration risk.

Maintaining a public markets portfolio can also help with tax planning prior to and at the time of a business sale. If your business is structured as a pass-through entity, like an LLC, S-Corp, or partnership, gains and losses from your business will flow directly to your personal tax return. This means that losses recorded in your public markets portfolio could help offset taxable gains from the business. This strategy is often called tax loss harvesting and it can be especially impactful in the year you sell your business.

This kind of strategy should be discussed with a financial advisor, and in some cases, a tax professional, to make sure it’s executed properly and in accordance with IRS rules.

Consider charitable giving or transferring shares before the sale of your business.

Donating or gifting shares in your business before a sale may provide significant tax advantages. For example, donating to a qualified charitable organization before the sale occurs can reduce capital gains taxes and potentially allow you to claim a charitable deduction for the fair market value of those shares.

The donation or transferring of shares must be made before any negotiations regarding the sale of the business have begun. If the IRS determines that the sale was already underway, the donation or transfer may not qualify for favorable tax treatment.¹

Donating shares in a privately held company comes with additional considerations. You’ll need to ensure that:

• The shares can be properly valued. This can be difficult when shares are not publicly traded.
• The charity you are donating to is able and willing to accept and manage the shares.
• Any necessary approval from other business stakeholders is secured.

These types of charitable strategies can be complicated, but when done properly, they may be a meaningful strategy to reduce taxes when it comes time to sell your business.

Set aside funds for taxes in a low risk, liquid account.

After the sale of your business, it’s important to preserve enough capital to cover the taxes owed. Depending on whether the business is being sold through stocks or assets, the tax rates and implications can differ. Asset sales are often taxed at ordinary income rates, while stock sales may qualify for more favorable long-term capital gains rates. It is important to know exactly what the tax implications will be prior to the sale of your business so you can ensure you have the capital to cover all necessary payments.

In many instances, it can be beneficial to receive the payments from the sale of a business in installments instead of as a lump sum. This can help soften the tax blow from the business sale and spread the tax consequences out over many years. In some instances, receiving the payments in installments can help keep you in a lower tax bracket, possibly reducing the total taxes owed from the sale.

Whatever structure you decide on for the sale of your business, it is important that you have enough liquid assets to cover the taxes when they are owed. This might mean allocating a portion of your assets to short term U.S. Treasury Bills. These are often considered one of the safest investments, as they are highly liquid and backed by the U.S. government.

The importance of working with a fiduciary prior to a business sale.

Selling a business is a complicated process and each situation is unique. We have experience going through the process and have advisors who are able to provide helpful guidance, whether the sale of your business is a distant thought or something that is happening imminently. We can help make sure that your investment and tax strategies align with your long-term financial goals – before, during, and after the sale of your business.

If you would like to discuss your financial strategy around a business sale, please reach out. We are fiduciaries on all accounts, for all clients, which means your interests will always come first.

(802) 503-8280 | welcome@onedayinjuly.com

1. "Publication 525 (2024), Taxable and Nontaxable Income | Internal Revenue Service.” Irs.gov. June 24, 2025
The above should not be construed as tax advice; individuals selling a business should consult their tax professional.