A significant portion of a business sale can disappear to taxes before the seller sees a dollar. There are legal strategies that change that math. Most people never hear about them.
Imagine spending twenty years building a business. You find a buyer, agree on a number, and finally sign the paperwork. Then your accountant tells you that after federal and state capital gains taxes, you are taking home somewhere between sixty and seventy cents on the dollar. For a lot of sellers, that is exactly what happens.
It is not a loophole or an oversight in the tax code. It is just how asset sales are taxed, and for most business owners, it comes as a shock because no one walked them through the alternatives early enough to do anything about it.
The alternatives exist. They are legal, they have been used for decades, and they are still largely unknown outside a narrow circle of specialized financial advisors.
The Problem With Conventional Exit Planning
The standard advice most business owners receive when they decide to sell goes something like this: work with a business broker to find a buyer, let your CPA handle the tax side, and plan to set aside roughly a third of the proceeds for the government. Some sellers end up paying more, depending on the structure of the deal and their state of residence. A few pay less. But the expectation of a significant tax event at the point of sale is treated as a given, not a variable.
What that framing misses is that the tax code treats different transaction structures very differently. A straightforward asset sale in a single tax year is one of the least efficient ways to exit a business from a tax standpoint. There are structures designed specifically to change the timing and treatment of that income, and they can dramatically alter the net amount a seller actually keeps.
The catch is that most of these strategies have to be set up before the sale closes.
Once a deal is signed, the options narrow considerably. That is where most sellers run out of road: they start thinking about tax planning after a buyer is already at the table.
What a Tax-Deferred Exit Actually Looks Like
One of the more powerful tools available to sellers is the installment sale trust, sometimes called a 537 trust after the section of the tax code that governs it. The basic premise is that rather than receiving the full proceeds of a sale in a single year and paying taxes on all of it at once, the seller transfers the asset into a trust structure before the sale closes. The trust then sells the asset, and the proceeds compound and generate income over time. Taxes are paid as distributions are received, not as a lump sum upfront.
The effect is significant. Instead of the sale proceeds being reduced by a capital gains tax bill before a dollar is reinvested, the full pre-tax amount goes to work immediately. Depending on the size of the transaction and the seller’s tax situation, the difference in long-term wealth can run into the hundreds of thousands of dollars, or more.
Kevin Brunner, a Trust and Estate Practitioner and the president of The Q Companies, has spent more than two decades working on this specific problem. His firm operates an in-house installment sale trust program and has been involved in thousands of transactions for business owners and real estate investors navigating exits. “The tax code is a whole list of coupons from the manufacturer,” Brunner has said of the strategies available to sellers. “Most advisors tell you to pay full price.”
His platform TaxFreeYou.com is designed around exactly this gap: giving business owners and real estate investors access to the kind of exit planning that has historically been reserved for clients of specialized multi-family offices.
Why Most Advisors Don’t Offer This
The installment sale trust is not a fringe strategy. It is a recognized structure with a clear basis in the tax code, and it has been used successfully for decades. The reason most business owners have never heard of it comes down to a few overlapping factors.
First, most CPAs and general financial advisors are not set up to administer trust structures. It requires a licensed trustee, specific legal documentation, and a level of coordination between legal, tax, and investment functions that falls outside the typical advisory relationship. It is not that the strategy is unavailable. It is that the infrastructure to deliver it is rare.
Second, the timing requirement creates a natural bottleneck. Sellers typically engage advisors when a deal is already in motion, which is often too late to implement the more sophisticated structures. By the time someone is asking questions about their tax bill, the window for certain planning strategies has already closed.
Third, and perhaps most importantly, the conventional financial services model is not designed around these outcomes. Advisors who work within broker-dealer structures have limited menus of approved products and services. A trust-based exit strategy that routes proceeds outside the standard investment pipeline is not something most of them are in a position to offer, regardless of whether it would serve the client better.
Starting Earlier Changes the Outcome
The consistent message from advisors who specialize in this space is that the single most impactful thing a business owner can do is start planning the exit long before a buyer appears. That is not because the legal structures are complicated. It is because the timeline for setting them up requires some runway.
An installment sale trust, for example, needs to be established and funded before a sale agreement is executed. That means having the right advisor in place, the right trust documentation prepared, and the right trustee engaged, all before any deal is on the table. For owners who start thinking about this two or three years before they intend to sell, the options are significantly broader than for those who start the conversation after a letter of intent has been signed.
The same logic applies to real estate investors considering a sale of appreciated property. The 1031 exchange is a widely used deferral tool, but it comes with restrictions, including a tight timeline and the requirement to reinvest in like-kind property. For investors who want more flexibility, the installment sale trust offers an alternative that does not require rolling proceeds into another property to preserve the tax benefit.
What to Look For in an Advisor
Not every financial advisor is equipped to handle a complex business exit. When evaluating who to work with, business owners should look for a few specific things.
First, fiduciary status. A fiduciary advisor is legally obligated to act in the client’s interest. That distinction matters enormously when the advice involves choosing between structures that serve the client versus structures that generate more revenue for the advisor’s firm.
Second, in-house trust capabilities. If a firm needs to refer out to a third-party trustee or accommodator for every transaction, there are additional fees and potential conflicts built into that relationship. Firms that handle trust administration internally have more control over the outcome and fewer moving parts.
Third, experience with the specific structure being recommended. Installment sale trusts are not standard practice. The advisor recommending one should be able to point to a meaningful track record and explain exactly how the structure works, how distributions are handled, and what the tax treatment looks like year by year.
For business owners who are years away from a sale, the most useful thing to do right now is find an advisor who specializes in exit planning and have that conversation before the timeline gets compressed. The strategies that produce the best outcomes are almost always the ones that got started early.