When a business owner receives a letter of intent to acquire their company for $20 million, the natural instinct is to focus entirely on the deal: the purchase price, the terms, the representations and warranties, the transition period. These are important. But some of the meaningful financial planning opportunities that may affect the owner's long-term wealth may no longer be available by the time the LOI arrives.
The window before a binding agreement is where the most powerful planning options exist. The business owners who make the most of this window — the ones who arrive at closing with a comprehensive plan — may be better prepared for what comes next; the availability and results of particular strategies depend on the facts and applicable law.
The Pre-Sale Planning Window: What Is Possible and When
The critical distinction in pre-sale planning is between strategies that must be executed before a binding sale agreement is in place and strategies that can be addressed during or after the transaction.
Must be done before a binding agreement
- Transfers to irrevocable trusts. Contributing business interest to an irrevocable trust before a letter of intent may remove future appreciation, and in some cases current value, from the taxable estate, subject to applicable law and the terms of the trust. Once an LOI is signed, the IRS may scrutinize whether a transfer is part of the sale transaction rather than a completed gift, which may affect the tax treatment.
- Charitable contributions of business interest. Donating business shares to a donor-advised fund or charitable remainder trust before a sale may allow the charitable entity to dispose of the interest without immediate entity-level income tax, subject to applicable rules, valuation requirements, and other limitations. Once the sale is contractually committed, the intended tax treatment may be unavailable.
- QSBS verification and planning. If the business qualifies as a Qualified Small Business (a domestic C-corp meeting specific requirements), the gain may be excludable from federal taxes — but the qualification must have been maintained for the full holding period. This needs to be verified and documented well before the sale.
Can be addressed during or after the transaction
- Transaction structure (asset vs. stock sale) — negotiated before close but often part of the deal itself
- Installment sale elections — can be structured as part of the deal
- Roth conversion planning — typically executed in the year of the sale or after
- Investment strategy for proceeds — implemented post-close
The Top Five Pre-Sale Actions for a $20M Business Owner
1. Get a current business valuation
Before any planning can be done, you need a credible estimate of the business's current fair market value. This is the baseline for all trust transfer planning (you cannot gift what you haven't valued) and for understanding the magnitude of the tax event you are facing. A qualified business appraiser — not just your accountant's estimate — should provide this.
2. Review your estate plan
Most business owners' estate plans were created when the business was worth far less. A $20 million exit will likely produce the largest concentration of liquid wealth the owner has ever had. The estate plan should be reviewed — and likely updated — before the sale to ensure that it accounts for the post-close asset level and includes the structures that make sense at that scale.
3. Transfer business interest to irrevocable trust structures
If the business will appreciate between now and the sale, and if you have estate tax exposure, consider contributing shares to a GRAT, SLAT, or dynasty trust now. The tax benefit comes from removing future appreciation — not just current value — from your taxable estate. The sooner this is done relative to the sale, the more appreciation can be transferred.
4. Evaluate charitable planning
If you have philanthropic intent — now or in the future — a charitable contribution of business interest before the sale may allow you to fund your charitable goals while generating a meaningful income tax deduction. A donor-advised fund can hold the contribution and make grants over many years, providing flexibility without sacrificing the tax benefit.
5. Plan the post-sale investment strategy
The transition from a concentrated illiquid business interest to a diversified investment portfolio is one of the most consequential investment decisions a business owner makes. The investment strategy should be designed before the sale closes — accounting for income needs, estate planning goals, risk tolerance, tax management, and the family's long-term wealth transfer objectives. Owners who arrive at closing without a plan tend to make rushed, suboptimal decisions.
The two to three years before a $20 million sale are arguably the highest-leverage planning period of a business owner's financial life. The decisions made in that window — about estate structures, charitable planning, transaction design, and investment strategy — shape the owner's financial position for decades. Get the right advisors in place early.
Building the Right Advisory Team for a Business Exit
A $20 million business sale requires more than one advisor. The team should include an estate attorney who specializes in business and estate planning transactions, a CPA with experience in business sale tax planning, a wealth advisor who can design the post-close investment strategy and coordinate with the other advisors, and potentially a business transaction attorney for the deal itself.
These professionals need to be working together — not in separate conversations with the business owner. The decisions they make in each domain affect the others, and the coordination between them is where the most significant value is created or lost.