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Exit Planning Rescues Business Owner – $3,806,067 in Tax Savings


How James Saved over $3 Million on his Taxes upon Exiting his Business (and Three Lessons you can Learn)


Do you have the right strategy in place for exiting your business? The right tax planner can help identify issues that may end up costing you millions.

You’ve worked so hard to create a profitable business. Now you’re ready to sell your business. Effective exit planning can rescue a business owner.

Finally, you’re at the point where you’re ready to move on. The business is solid, and you have the opportunity to sell it and enjoy the fruits of your labor.

Then the IRS comes calling…

They want to take as much money out of the sale as they possibly can. And if you don’t have a suitable exit plan in place, you’re going to lose millions.

But here’s the good news…

There’s still time to rescue your money. When you create a powerful exit strategy, you can account for taxes and protect your assets.

That’s what James needed help with when he came to Ed Lloyd & Associates.


The Successful Business Sale

James (not his real name) had poured his heart and soul into growing his business. He’d worked hard to create a growth acceleration strategy and he’d followed it to the letter.

It paid off.

He had a thriving business, a great team, and a plan in place for continued growth.

But he also had an opportunity.

Another company had come to him with a proposal. They would buy his ownership of the business for a cool $9 million.

That’s retirement-level money!

James knew he had a chance to exit the business and live the life he’d always dreamed of.

There was just one problem…


The Huge Tax Bill

When people consider exiting their businesses, they often make the mistake of only thinking about how much money they stand to gain.

In James’ case, $9 million is a very shiny carrot to have dangling at the end of your nose. The temptation is to get the exit over with as soon as possible, so you can get your hands on the cash.

But there’s a huge tax bill waiting for you if you don’t plan correctly.

The plan that James had would have cost him $4,410,425 in taxes to execute.

That’s almost half of the money gone before he could ever get his hands on it. Plus, it didn’t even include fees paid to legal professionals and other consultants.

That just wasn’t acceptable to James, which is why he scheduled a strategy session with us.


Dissecting the Plan

Based on the basic information he shared, it was pretty obvious to us that James didn’t have a tax-effective exit strategy.

But our job is to really dig in and find out what’s going on with a business to create such a huge tax bill.

We identified several issues, including the following:

  • James’ CPA hadn’t really put much effort into James’ exit plan. It seemed tailored to make the CPA’s job as easy as possible, rather than serving James’ best interests.
  • The company’s structure was all wrong for that type of It was operating based on a typical corporate structure, which created many holes for cash to bleed from.
  • The current tax plan had already caused James to pay more income tax than he should each year. And if it stayed in place, he would have to pay double taxation on the sale.

In short, the plan that James had simply didn’t account for the sheer magnitude of the transaction. This is millions of dollars we’re talking about. That requires in-depth planning and consideration of a host of issues, from business structure to assets.

We had to get to work and we had to do it quickly, because the sale date was approaching fast…


Our Solutions

First, we educated James on the five phases of a business sale:

  1. Pre-sale
  2. Sales Negotiation
  3. Letter of Intent
  4. Sales Agreement
  5. Closing

Each phase presents tax concerns that James needed to account for. That meant we needed a plan in place for each of them.

From there, we focused on the company’s structure. We put the wheels in motion to change it. But with such a short amount of time before the sale, it wasn’t going to be the most tax-effective option.

Far more effective was our focus on James’ deductions. He had made plenty of charitable contributions, both personally and through the business, that he could deduct from his taxes. Couple that with an array of missed deductions and he had a sizeable sum of money he could claim back.

Finally, we analyzed several tax reduction strategies and chose the ones that suited James’ business.


The End Result

A $4,410,425 tax bill is enough to strike terror into the heart of any business owner.

But with our strategies, James managed to rescue $3,806,067.

In the end, he only paid $604,358 in income taxes for the year of the company’s sale!





The Lessons You Can Learn


James’ story shows us that chasing the “quick and easy” sale can cost you a lot of money. If you’re looking to exit your business, you need to have a strategy in place.

Make sure you take these three lessons to heart if you find yourself in James’ position.


Lesson #1 – It’s Not About an Easy Sale

Sure, you could just draft up an agreement, settle the sale, and pay the IRS a huge share.

In James’ case, that would have still left him with $4.5 million in his pocket.

But why pay more than you must? Going for the easy sale would have cost millions. It’s a disservice to how hard he worked to build a sellable business.


Lesson #2 – There’s No One-Size-Fits-All Tax Strategy

This is the issue many business owners run into when working with CPAs.

Public accountants apply the same strategies to every business, which means they don’t understand the specific needs of each client.

We discovered that James’ business structure wasn’t best suited to helping him save money on his taxes. Unfortunately, it was too late for us to rescue the hundreds of thousands of dollars he’d already overpaid over the years.

Again, don’t go for the simple option. Consult a tax planner, rather than a tax preparer, to create a suitable business entity.


Lesson #3 – Check Your Deductions

We repeat this point with business owners so often because it’s something they keep missing.

It’s very likely that you can make more deductions than you’re making right now. That goes for both your business and personal taxes.

And on top of that, the IRS changes its rules around deductions every year. That means something you couldn’t deduct five years ago may be a viable deduction today.

It’s crucial that you re-evaluate your deductions for every new tax year.



Are You Ready to Exit Your Business?

With our help, James saved an enormous amount of money on the taxes related to exiting his business.

Perhaps you find yourself in a similar position. You’ve worked hard to get to the top and you’re now ready to sell and enjoy yourself.

The earlier you start planning, the better your exit will be.

We want to help you.

Schedule a strategy session with the Ed Lloyd & Associates team to find out more.


Exit Your Business – Learn more here!

Tax Reduction and Business Growth Services from Ed Lloyd & Associates

When you’re ready to accelerate your business, schedule a call with me.

Have an awesome day!


Ed Lloyd, CPA, PFC, CTS, CVB
(704) 544-7600 | |

Call (704) 544-7600
Ed Lloyd & Associates, PLLC