A Story Too Familiar

An entrepreneur sells her company for $25 million. Friends celebrate. Headlines congratulate. But when the dust settles, she wires nearly $9 million to the IRS and her state’s revenue department.

What stings most isn’t the tax itself—it’s realizing that with better planning, millions of those dollars could have stayed in her family’s balance sheet instead of vanishing into government coffers.

This story plays out every year. In fact, taxes are often the single largest expense for high-income entrepreneurs—bigger than payroll, rent, or even reinvestment into the business. And unlike many costs, taxes are both predictable and manageable with strategy.

Why Taxes Are the Silent Profit Killer

1. Creeping Rates: Federal + state combined capital gains can easily exceed 30% in many jurisdictions.
2. Phantom Income: Paper profits (like depreciation recapture or installment mismatches) can create taxes without cash in hand.
3. Missed Structures: Failure to use QSBS (Qualified Small Business Stock), trusts, or installment plans can lock in unnecessary taxes.
4. Timing Traps: Selling in the wrong calendar year, or forgetting to offset gains with harvested losses, can swing outcomes by seven figures.

These aren’t exotic loopholes. They’re strategies hidden in plain sight—but only if you prepare early.

The Power of Strategy: Two Scenarios

Scenario A: No Planning

• $20M business sale
• Effective combined tax = 28%
• Taxes paid: $5.6M
• Net: $14.4M

Scenario B: Strategic Planning (3 years prior)

• Pre-sale gifting into a Charitable Remainder Trust
• Harvested losses from underperforming investments
• Restructured entity for QSBS qualification on a portion
• Staggered part of the sale via installment

Effective combined tax: 21%
Taxes paid: $4.2M
Net: $15.8M

Result: $1.4M more to the owner’s family—enough to endow a foundation, fund a child’s future, or expand passive income streams.

The Lesson Most Entrepreneurs Miss

The true cost of taxes isn’t just the check you write each April—it’s the compounding opportunity you lose.

• Saving $1M in taxes, invested at 7% annually, grows to $7.6M in 30 years.
• That’s not tax avoidance—it’s tax-aware wealth building.

What to Do Now

1. Run a Tax Health Check: When was the last time your past 3–5 years of returns were reviewed for missed opportunities?
2. Model Your Exit Early: Even if you don’t plan to sell soon, exit-driven tax planning often takes years to position.
3. Integrate Taxes Into Every Decision: From hiring to real estate, your tax position is a lever, not a side effect.
4. Partner With a Tax Strategist, Not Just a Preparer: Filing is history. Strategy is future.

Closing Thought

Entrepreneurs often obsess over revenue growth, margins, or valuation multiples. But the quietest and most controllable lever of wealth is tax strategy. Ignore it, and you’ll bleed millions invisibly. Embrace it, and you turn today’s dollars into tomorrow’s legacy.