Tax Structure Decision Tree for Business Sellers (2026): Entity Type, State, and Holding Period

“What’s the best tax structure for selling my business?” is the wrong question. The right question is “given my entity type, my state of residence, and how long I’ve held the business, which branch of the tax decision tree applies to me?” The structure that minimizes tax for an S-corp owner in Texas is different from the one that minimizes tax for a C-corp owner in California is different from the one that minimizes tax for an LLC partnership in Tennessee.

This guide is the decision tree. Three primary branches: entity type, residence state, and holding period. Each branch maps to specific tax outcomes. We’ll walk through each branch with the actual numbers and show how the combinations stack up. The goal is to give you a framework to identify your specific path — not generic advice that misses your situation.

The tax code changes regularly. Section 1202 thresholds, capital gains brackets, and state-level treatment all shift periodically. Run final structure decisions through your CPA and tax attorney before signing any LOI. The decision tree below is the starting point that helps you ask better questions.

Important caveat: this is a planning framework, not tax advice.

The framework comes from CT Acquisitions’ direct work with 76 active U.S. lower middle market buyers and the structuring conversations we have with sellers in our network. We’re a buy-side partner. The buyers pay us when a deal closes — not you. That gives us a clear-eyed view of the structures that work in real LMM deals (asset sales with negotiated allocations, F-reorgs to convert C-corps before sale, QSBS planning, state residency moves) and the ones that look good on paper but break in practice.

“Stock vs asset sale is the $200K-$1M decision most owners make in the wrong order. The right sequence: define the buyer archetype first, run the structure math second, negotiate price third. A buy-side partner already knows which structure each buyer type accepts — the broker selling you a process is solving a different problem.”

Key Takeaways

• The tax decision tree has three primary branches: entity type, residence state, and holding period. Each maps to a different optimal structure.
• S-corp / LLC pass-through entities generally get clean capital gains treatment. C-corps face double-tax unless converted via F-reorg 5+ years pre-sale.
• Section 1202 QSBS can exclude up to $10M (or 10x basis) of gain entirely — but only for C-corps held 5+ years that meet specific criteria.
• State residency timing matters: a 12-24 month genuine relocation to a no-tax state can save $300k-$1.3M on a $10M deal.
• Asset sale vs stock sale isn’t a single decision — it’s the output of the entity, state, and holding-period decisions. Buyers usually want assets; sellers usually want stock; the gap is bridged by allocation negotiation and price adjustment.
• Most LMM tax planning needs to happen 18-24 months before the LOI — after that, the most powerful levers (entity conversion, residency, Section 1202 holding period) are no longer available.

Why a decision tree (and not a single answer) is the right framework

Most tax-structure articles try to give you a single “best” answer. “Always do a stock sale.” “Always negotiate allocation toward goodwill.” “Always move to Florida.” The problem is that the right answer depends on your specific entity type, your specific state, your specific holding period, and your specific buyer. A blanket recommendation that ignores those inputs will optimize for the wrong variable.

The decision tree below maps inputs to outputs. Start at the top with “What entity type do you have?” That answer narrows the choices. Then “What state are you in?” narrows further. Then “How long have you held the business?” gives you the final path. By the time you reach the end of the tree, the structure decision is largely determined — not by guesswork, but by the constraints of your situation.

The other reason a tree is the right framework: different branches produce dramatically different tax outcomes. A $10M sale by an S-corp owner in Texas with a 10-year holding period can net $7.5-8M after federal tax. The same $10M sale by a C-corp owner in California with a 3-year holding period can net $4-5M. That’s a $3M+ swing driven entirely by where you sit on the tree.

The decision tree at a glance

Here’s the full branching logic in table form. Walk down the tree by answering each question. The combination of your three answers points to a specific structure path. We’ll dig into each branch in the sections that follow.

Read the table left to right. The far-left column is the entity-type branch. The middle column is the state-residence branch. The right columns describe the typical structure path and the federal-plus-state effective rate range. Holding period is layered on top in the next section.

Entity type	State of residence	Typical structure path	Effective federal+state rate
S-corp	No-tax state (TX, FL, WY, NV, TN, WA, SD)	Asset sale with negotiated allocation; pass-through to owner at LTCG rates	20-23.8%
S-corp	Mid-tax state (CO, GA, NC, AZ, VA)	Asset sale; pass-through; consider state residency review 12-24 months pre-sale	24-28%
S-corp	High-tax state (CA, NY, NJ, OR, MN)	Asset sale; pass-through; aggressive state residency planning recommended	30-37%
LLC (partnership-taxed)	No-tax state	Asset sale; pass-through; Section 751 hot-asset analysis on inventory and AR	20-25%
LLC (partnership-taxed)	High-tax state	Asset sale; same as above plus state residency planning	30-38%
LLC (single-member, disregarded)	Any state	Treated as sole proprietor sale; asset sale at LTCG rates with hot-asset adjustments	20-37%
C-corp (held under 5 years)	Any state	Stock sale strongly preferred; or F-reorg if buyer requires assets; double-tax exposure	35-50%
C-corp (QSBS-qualified, held 5+ years)	Any state	Stock sale with Section 1202 exclusion up to $10M or 10x basis	0-23.8% on excluded portion
Partnership (general or LP)	Any state	Asset sale with Section 751 hot-asset adjustments; pass-through to partners	20-37%
Sole proprietorship	Any state	Asset sale; ordinary income on inventory + depreciation recapture; LTCG on goodwill	Mixed: 20-37% on goodwill, ordinary on rest

Branch 1: Entity type — S-corp

S-corps are the most common entity type in lower middle market deals. They get clean pass-through treatment, meaning the corporate-level gain flows directly to the owner’s personal return at long-term capital gains rates (assuming the assets were held over a year). No double-tax. No corporate-level tax on the sale.

The S-corp structure path in practice: almost always an asset sale. Buyers prefer asset sales because they get a stepped-up basis on the assets purchased — meaning they can depreciate the goodwill, customer lists, and equipment they bought, generating tax shields for the next 5-15 years. Sellers usually accept asset sales because the pass-through structure means the seller’s tax outcome is similar to a stock sale (LTCG on the gain), with two adjustments: depreciation recapture on equipment (taxed as ordinary income, not LTCG) and ordinary income treatment on any inventory transferred.

The negotiation point in S-corp asset sales: purchase price allocation. The IRS requires both buyer and seller to agree on how the purchase price is allocated across asset categories (Form 8594). Buyers want to allocate toward depreciable assets (equipment, customer lists) for faster write-offs. Sellers want to allocate toward goodwill (taxed at LTCG rates, not ordinary income from depreciation recapture). The negotiation typically takes 30-60 days and can swing the seller’s after-tax outcome by 2-5%.

Special case: S-corp built-in gains tax. If your S-corp was previously a C-corp and you sell within 5 years of the conversion, built-in gains tax can apply at the corporate level. If you converted more than 5 years ago, you’re clear. If you converted recently (or are considering converting now to escape C-corp status), make sure the 5-year clock is running before the sale — otherwise, you’re facing the same double-tax you tried to avoid.

Branch 1 continued: LLCs and partnerships

LLCs taxed as partnerships work similarly to S-corps with one important wrinkle: Section 751 “hot asset” rules. When a partnership sells (or a partner sells their interest), certain assets — primarily inventory and unrealized receivables — are treated as ordinary income, not capital gain. This can be material in inventory-heavy businesses (distribution, manufacturing) where 10-20% of the purchase price is essentially inventory.

Single-member LLCs (disregarded entities) are simpler. The IRS treats them as sole proprietorships for tax purposes. The sale is an asset sale, with depreciation recapture on equipment (ordinary income) and LTCG on goodwill. No partnership-level complications. No K-1s to amend post-sale.

True general partnerships and limited partnerships: less common in lower middle market deals but follow the same Section 751 logic. Each partner’s share of the gain flows through to their personal return. Partners in different states or holding periods can face different tax outcomes from the same transaction — which sometimes creates intra-partner negotiation issues that should be resolved before going to market.

The LLC / partnership tax planning move that’s often missed: if you have outside investors with negative capital accounts, the sale can trigger phantom income for those investors. Run the partnership tax modeling 6 months before going to market so you can adjust distributions, capital contributions, or basis-tracking before the deal closes.

Branch 1 continued: C-corps and the double-tax problem

C-corps face the dreaded double-tax on asset sales. First, the corporation pays tax on the gain (21% federal corporate rate plus state). Then, when the corporation distributes the after-tax proceeds to shareholders as a dividend, shareholders pay capital gains tax on the dividend. The combined effective rate can hit 35-50% — substantially higher than the 20-30% an S-corp owner pays on the same deal.

The mitigation: stock sale instead of asset sale. If the buyer agrees to a stock sale, the corporate-level tax disappears. The seller pays only personal-level capital gains on the stock sale. This is why C-corp owners almost always push for stock sales. The problem: buyers strongly prefer asset sales for the basis step-up and to avoid inheriting historical liabilities. The negotiation often results in a hybrid (Section 338(h)(10) election for asset-sale treatment with stock-sale form, or an F-reorganization to convert the C-corp to a pass-through structure pre-sale).

F-reorganization is the best LMM tool for C-corp sellers. An F-reorg converts a C-corp into a single-member LLC (which is taxed as a disregarded entity) before the sale. The conversion itself is generally tax-free. Then the sale happens at the LLC level as an asset sale, and the seller gets pass-through treatment. The catch: F-reorgs are technical, require precise sequencing, and need to be done at least 60-90 days before any LOI is signed. They’re also a structure that buyers will scrutinize during diligence — so the documentation needs to be airtight.

The other powerful C-corp move: Section 1202 QSBS. If your C-corp meets the Qualified Small Business Stock criteria (gross assets under $50M when stock issued, active business, held 5+ years), you can exclude up to the greater of $10M or 10x your basis from federal capital gains tax. On a $10M sale where the founder has $1M basis, that means $9M of gain is potentially federal-tax-free. Section 1202 is one of the most underused tax planning tools in LMM — if you have a C-corp, ask your CPA whether you qualify NOW (not 6 months before sale).

Branch 2: State of residence

Federal tax is roughly the same regardless of where you live. 20% long-term capital gains plus 3.8% net investment income tax = 23.8% federal. State tax is where the variation explodes. Texas, Florida, Wyoming, Nevada, South Dakota, Tennessee, and Washington have no state income tax on capital gains (Tennessee phased out its Hall Tax in 2021; Washington has a 7% capital gains tax that survived legal challenge but only kicks in above a threshold).

California is the most aggressive on capital gains: 13.3% top rate, applied to all gain, no preferential treatment for long-term capital gains. New York follows at up to 10.9% combined state and city. New Jersey at 10.75%. Oregon at 9.9%. Minnesota at 9.85%. A California seller of a $10M business pays $1.33M in state tax alone — on top of the $2.38M federal tax.

The state-residency arbitrage: establishing genuine residency in a no-tax state 12-24 months before the sale can eliminate state tax entirely. The key word is “genuine.” Tax authorities in California, New York, and other high-tax states aggressively challenge residency moves they consider tax-motivated. The bar for genuine residency: physical presence at least 183 days/year, primary home in the new state, drivers license + voter registration moved, professional and personal relationships shifted, family relationship with the state demonstrated.

Common pitfalls in residency planning: keeping a home in California “for the kids in school.” Maintaining an office in New York. Continuing to file as a resident for any portion of the sale year. The residency move needs to be complete — documented, defensible, and ideally accomplished 24+ months before the sale closes. A botched residency move can trigger back taxes plus penalties plus interest, often costing more than the original tax would have.

When the residency move makes sense: for sales above $5M, the math usually works in favor of moving. Below $2M, the personal-life cost of moving rarely justifies the tax savings. In the $2-5M range, it depends on personal circumstances (family, business location, owner’s age and post-sale plans). Run the math both ways before deciding.

Branch 3: Holding period

Holding period determines whether your gain is short-term or long-term. Short-term gain (held under 1 year) is taxed as ordinary income — up to 37% federal. Long-term gain (held over 1 year) is taxed at 0/15/20% federal plus 3.8% NIIT — capped at 23.8%. The difference on a $10M gain: $1.4-2M+ of additional federal tax for short-term treatment. Most LMM businesses have been held 5+ years, so the long-term threshold is rarely an issue for the founder. It can be an issue for newer co-owners or recent equity grants to executives.

The 5-year holding period is critical for QSBS (Section 1202). If you held qualifying C-corp stock for 5+ years, you can exclude up to the greater of $10M or 10x basis from federal capital gains. Held under 5 years? You can’t use Section 1202 directly — but Section 1045 lets you defer the gain by rolling it into another QSBS company within 60 days. This is sometimes used by serial founders who reinvest sale proceeds into a new QSBS-eligible business.

Other holding-period rules to know: depreciation recapture (Section 1245) applies to equipment regardless of holding period — you pay ordinary income on the depreciation taken, no LTCG benefit. Section 1250 recapture on real estate caps at 25% federal. Goodwill amortization recapture: amortized goodwill (Section 197 intangibles) is recaptured at LTCG rates, not ordinary, which is favorable for sellers.

If you’re close to a holding-period threshold: delay the sale until you cross it. The difference between selling at month 11 vs month 13 can be 15+ percentage points of federal tax. The difference between selling at year 4 vs year 5 of QSBS ownership can be the entire $10M Section 1202 exclusion. These thresholds are non-negotiable cliffs — if the deal can wait 60-90 days to cross them, it almost always should.

Combining the branches: example pathways

Path A: S-corp owner in Texas, 10-year holding period. Best-case scenario. Asset sale at LTCG rates, no state tax, all gain qualifies as long-term. $10M sale with $500k basis = $9.5M gain taxed at 23.8% federal = $7.74M net to seller. Section 1202 not available (S-corp), but the structure is already near-optimal.

Path B: C-corp owner in California, 8-year holding, QSBS-qualified. Apply Section 1202 to exclude up to $10M federal gain. California still taxes the gain (no state-level QSBS conformity) at 13.3%. $10M sale, $500k basis: federal tax on excluded portion = $0; state tax = $1.26M. Net to seller: $8.74M. Without QSBS, the same C-corp owner would face double-tax = effective rate 35-50% = net to seller around $5-6.5M.

Path C: LLC partnership in New York, 5-year holding, no residency planning. Asset sale with Section 751 hot-asset analysis. Pass-through to partners at federal LTCG rates plus NY state tax up to 10.9%. $10M sale, mostly goodwill (favorable allocation), some inventory (unfavorable). Effective combined rate ~32%. Net to seller: $6.8M. With 24-month NY-to-FL residency move pre-sale: net improves to $7.62M (saves the state tax).

Path D: C-corp owner in California, 3-year holding, no F-reorg, asset sale required by buyer. Worst-case scenario. Double-tax: 21% federal corporate + 8.84% California corporate on the corporate-level gain, then 23.8% federal + 13.3% California on the personal-level dividend distribution. Effective rate around 50%. Net to seller on $10M sale: roughly $5M. The same owner with an F-reorg done 6+ months pre-sale could push net proceeds to $6.5-7M.

The 18-24 month tax planning window

The most powerful tax planning levers require 18-24 months of lead time. F-reorganizations need to be done at least 60-90 days before LOI, but ideally 6-12 months before to allow the structure to season. State residency moves need 12-24 months of genuine establishment. QSBS holding-period planning is years ahead of the sale. Section 1202 planning starts at company formation.

What this means in practice: if you’re thinking about selling in the next 12 months and you haven’t done tax planning yet, you’re late. Most of the powerful levers are already unavailable. You can still negotiate purchase price allocation, you can still optimize the LOI structure, you can still time the close to cross holding-period thresholds — but the bigger moves (entity conversion, residency change, QSBS qualification) can’t be done in 12 months.

If you’re 18-24 months out from a potential sale: this is the high-value planning window. Run the decision tree above with your CPA and tax attorney. Identify the branches that apply to you. Decide which moves (if any) make economic sense given your specific situation. The earlier you start, the more options you have.

If you’re 5+ years from a potential sale: this is the foundational planning window. Section 1202 starts at formation. Entity-type choice matters from day one. Even basic things like setting up a proper accounting system that supports clean QoE later are easier when the business is small. Owners who plan from formation often save 3-5x the tax of owners who plan in the final year.

Common tax-planning mistakes (and how to avoid them)

Mistake 1: Optimizing one branch and ignoring the others. An owner who moves to Florida but keeps a C-corp gets the state-tax savings but eats the double-tax. An owner who converts to an S-corp but stays in California eats the state tax. The whole tree needs to be optimized together — not one branch at a time.

Mistake 2: Doing the F-reorg too late. F-reorgs done after the LOI is signed get scrutinized as “step-transaction” abuses. The IRS can collapse the F-reorg back into a C-corp asset sale and impose double-tax retroactively. F-reorgs should be done 60-90 days minimum, ideally 6-12 months, before any LOI.

Mistake 3: Botching the residency move. Maintaining a home, an office, family ties, or a job in the high-tax state while claiming residency in a no-tax state. Tax authorities are aggressive on this. The bar for genuine residency is high — 183+ days physical presence, primary home, drivers license, voter registration, professional relationships, family connections, all moved.

Mistake 4: Missing the Section 1202 opportunity. Many C-corp owners don’t know Section 1202 exists, or they assume their stock doesn’t qualify. Get a Section 1202 analysis from your CPA whenever you have a C-corp held 5+ years. The exclusion can be worth $2-3M in federal tax savings on a $10M sale.

Mistake 5: Treating tax planning and deal structuring as separate. The structure of the deal (asset vs stock, purchase price allocation, earnout structure, rollover equity) interacts with the tax planning at every step. Your CPA and your M&A advisor need to be talking to each other from the LOI stage forward. A great tax plan executed against a poorly-structured deal still costs you money.

When to involve which advisors

CPA: at company formation, then continuously. Your CPA should be running entity-type analyses, depreciation strategies, basis tracking, and tax-efficient distribution policies year-round. By the time you’re 18-24 months from sale, the CPA should be modeling the after-tax outcomes under different deal structures.

Tax attorney: 18-24 months pre-sale. Bring in a transactional tax attorney once you’re seriously considering a sale. They handle the F-reorgs, the QSBS qualification opinions, the multi-state residency analysis, and the structural negotiation during the LOI and definitive agreement phases.

M&A advisor or buy-side partner: 12-24 months pre-sale. Your deal advisor coordinates the structural negotiation with buyers in real time. They ensure the LOI terms align with the tax plan. They negotiate purchase price allocation, earnout structure, and rollover equity in ways that maximize the tax outcome. The best deals are the ones where the tax team and the deal team are coordinating from day one.

Estate planning attorney: in parallel with tax attorney. Many sellers want to combine the sale with estate planning — gifting equity to heirs pre-sale to use up lifetime exemption, structuring grantor trusts to hold rollover equity, planning charitable giving via DAFs or CRTs. This works best when the estate attorney is involved 18+ months before the sale, alongside the tax attorney.

What changed in 2025-2026 (and what might change next)

Capital gains brackets in 2026: 0% on income up to ~$48k (single) / $96k (married), 15% up to ~$533k single / $600k married, 20% above. NIIT 3.8% applies above $200k single / $250k married AGI. Most LMM business owners hit the 23.8% top rate.

State-level changes since 2024: Tennessee fully eliminated the Hall Tax in 2021. Washington’s capital gains tax (7%) survived state Supreme Court challenge in 2023. Massachusetts added a 4% surtax on income over $1M starting 2023. California, New York, New Jersey, and Oregon rates remain unchanged but residency enforcement has tightened.

Section 1202 QSBS: the exclusion limit ($10M or 10x basis) and the 5-year holding period are unchanged. The list of eligible industries is unchanged (most active businesses qualify; certain service businesses and finance/investment businesses don’t). Some recent legislative proposals would expand or contract Section 1202 — check current law before relying on it.

Possible future changes to watch: any proposal to raise capital gains rates above 23.8% would shift the math. State-level wealth taxes (proposed in California, New York, Washington) could change the residency calculus. Federal estate tax exemption is scheduled to drop in 2026 from ~$14M to ~$7M per person if Congress doesn’t extend the higher level — which interacts with sale proceeds in significant ways.

Conclusion

What’s the best tax structure for selling your business? It depends on your entity, your state, and your holding period — and the right answer requires walking the full decision tree, not picking a single ‘best practice’ that ignores your specifics. The owners who pay the least tax aren’t the ones with the highest income; they’re the ones who started planning 18-24 months before the LOI, optimized every branch of the tree, and coordinated their CPA, tax attorney, and deal advisor from day one. The framework above is the starting point. Your CPA and tax attorney handle the execution. And if you want to talk to someone who knows the buyers personally instead of running an auction — and who can structure the deal in a way that aligns with your tax plan — we’re a buy-side partner, the buyers pay us, not you, no contract required.

Frequently Asked Questions

What’s the single biggest tax mistake business sellers make?

Optimizing one branch of the decision tree and ignoring the others. An owner who converts to an S-corp but stays in California eats the state tax. An owner who moves to Florida but keeps a C-corp eats the double-tax. The branches need to be optimized together, not one at a time.

How much tax will I pay on a $5M business sale?

It depends on your entity, your state, and your structure. An S-corp owner in Texas with a 10-year holding period pays roughly 23.8% federal and 0% state = $1.19M total tax, netting $3.81M. The same sale by a C-corp owner in California in an asset-sale structure can hit 50% effective rate = $2.5M tax, netting $2.5M. Run the decision tree above to find your specific path.

Should I do an asset sale or a stock sale?

Asset sales benefit buyers (basis step-up, no inherited liabilities). Stock sales benefit sellers (single layer of tax, especially for C-corps). Most LMM deals end up as asset sales because buyers won’t budge, but with negotiated price adjustments to compensate sellers for the tax difference. C-corp sellers have a stronger case for stock sale because of the double-tax problem; S-corp and LLC sellers have less to lose from asset structures.

What is Section 1202 QSBS and do I qualify?

Section 1202 lets you exclude up to the greater of $10M or 10x your basis in federal capital gains tax on qualifying C-corp stock held 5+ years. Qualifying criteria: C-corp at issuance, gross assets under $50M when stock issued, active business (most industries qualify; some service and finance businesses don’t). If you have a C-corp held 5+ years, get a Section 1202 analysis from your CPA. The exclusion can be worth $2-3M+ on a $10M sale.

Can I move to Florida the year I sell my business to avoid state tax?

Probably not effectively. Tax authorities in California, New York, and other high-tax states aggressively challenge tax-motivated residency moves. Genuine residency requires 183+ days physical presence, primary home in the new state, drivers license + voter registration moved, professional and personal relationships shifted — and ideally 12-24 months of established residency before the sale closes. A botched move triggers back taxes plus penalties plus interest, often more than the original tax.

What is an F-reorganization and when does it make sense?

An F-reorg converts a C-corp into a single-member LLC pre-sale. The conversion is generally tax-free, then the sale happens at the LLC level as an asset sale with pass-through treatment — avoiding the C-corp double-tax. Best done 60-90 days minimum, ideally 6-12 months, before any LOI. Done after the LOI, the IRS can collapse it as a step-transaction and reapply the double-tax. F-reorgs are technical and require a transactional tax attorney.

What is depreciation recapture and how much will it cost me?

Depreciation recapture is the rule that taxes back, at ordinary income rates, the depreciation deductions you’ve taken on equipment over the years. If you’ve fully depreciated $500k of equipment and sell it for $300k, the entire $300k is taxed at ordinary rates (up to 37%) instead of LTCG rates. In a sale, this hits the asset-allocation negotiation directly: equipment-heavy allocations cost the seller more. Goodwill allocations are favored at LTCG rates.

Should I gift equity to my children before the sale to save taxes?

Possibly. Pre-sale gifting can use up your lifetime estate tax exemption (currently around $14M but scheduled to drop to ~$7M in 2026 if not extended) and shift future appreciation out of your estate. Done correctly, this can save significant estate tax for high-net-worth families. Done incorrectly, it triggers gift tax and creates basis problems for the recipients. Bring in an estate planning attorney 12-24 months before the sale.

What is the Net Investment Income Tax (NIIT) and does it apply to my sale?

NIIT is a 3.8% federal surtax on investment income (including capital gains) for taxpayers with AGI above $200k single / $250k married. Most LMM business sellers hit the threshold, so NIIT applies to the gain on top of the 20% LTCG rate, bringing the federal rate to 23.8%. Active business owners can sometimes structure the sale to reduce NIIT exposure, but the rules are technical — coordinate with your CPA.

How does an installment sale or seller financing affect my taxes?

An installment sale spreads the gain over multiple years, deferring the tax until payments are received. This can keep you in lower brackets, smooth income for state-tax purposes, or qualify you for retirement-related tax preferences. Tradeoffs: you carry buyer credit risk, the gain is still taxable as installments are received, and the effective rate may be similar over time. Useful for some sellers, not for all — run the math both ways.

Can I roll equity into the buyer’s company to defer tax?

Yes, in many PE deals. Rollover equity (typically 10-30% of consideration in PE platform deals) is structured as a tax-deferred exchange of your old equity for new equity in the buyer’s entity. Tax on the rolled portion is deferred until the buyer eventually sells (usually 3-7 years later). The non-rolled portion is taxed at the original sale. Rollover equity also gives you a “second bite” if the buyer grows the business successfully.

Should I run a sell-side QoE before going to market for tax purposes?

Yes if your business has material add-backs ($100k+) or recent ownership changes. Sell-side QoE doesn’t directly reduce taxes, but it pre-validates your reported EBITDA and cleans up tax-relevant items (owner expenses, related-party transactions, basis tracking) before the buyer’s QoE finds them. The cleaner your books going in, the cleaner the tax planning options coming out.

How is CT Acquisitions different from a sell-side broker or M&A advisor?

We’re a buy-side partner, not a sell-side broker. Sell-side brokers represent you and charge you 8-12% of the deal (often $300K-$1M) plus monthly retainers, run a 9-12 month auction process, and require 12-month exclusivity. We work directly with 76+ buyers — search funders, family offices, lower middle-market PE, and strategic consolidators — who pay us when a deal closes. You pay nothing. No retainer, no exclusivity, no contract until a buyer is at the closing table. You can walk after the discovery call with zero hooks. We move faster (60-120 days from intro to close) because we already know who the right buyer is rather than running an auction to find one.