We understand the time, money and effort you've poured into building your business. Now, as you consider your future, exit planning becomes crucial to ensure a smooth transition and maximize your return on investment

Sacramento Business Exit Planning Attorney

Exit Planning Success Stories

• We represent three (3) shareholders being bought out of their company this year for over $3.6 million. Payments would be received in 2025 and 2026. We recommended the restructure of the sale to an option that closes in 2026. The deal points generally remained the same for the Buyer. The payments received in 2025 are not taxable until 2026 when the option closed. The tax due would not be paid or owed until April 15, 2027. 

  We also recommended a NIMCRUT (Net Income Make-Up Charitable Remainder Unitrust). The shares contributed to the Trust provide an income tax deduction and the sale is not subject to tax. This allows the client to invest the entire portion of the sale proceeds allocable to the Trust without reduction for tax. This type of charitable trust allows for payments to be skipped or retained in Trust under the management of the Client’s financial advisor for increased growth or value. A lump-sum payment is made to the clients half-way through the term to provide increased value or funds to the client. Annuity payments continue for the client for the remainder of the term. 

  With a $450,000 contribution to the NIMCRUT, the actual tax savings for each client was approximately $190,000. Client also received annuity payments of $600,000.

• We represent two (2) clients who formed a business with an investment of approximately $1.2 million in 2023. The clients were in the process of selling the company through an investment banker for over $600 million. The sale was expected to close within 60 days or so. 

  Those that work with us for tax planning know that we need up to two (2) years or more to implement the best tax minimization strategies. Despite the short time frame, we successfully designed an intermediate structured sale to defer tax for up to 30 years. We were able to also utilize a split interest charitable trust and charitable lead annuity trust to substantially minimize tax on the sale. Before implementation, the sale was put on hold by the investment banker negotiating the sale due to the uncertainty in the market place due to the tariffs being imposed.

• Family technology/service business operated as an S Corporation to be sold for $7 million. Two (2) specific structures were utilized to minimize tax and build wealth for the Seller and his family (our Clients). First, $2 million of personal goodwill was established for the Client. This was needed because of the ownership restrictions for S Corporation stock. This personal goodwill was contributed to a Split Interest Charitable Trust (the “Trust”) that provided the following two (2) benefits: (1) No capital gain on $2 million for the sale of the goodwill contributed to the Trust. Tax savings: $740,000 and (2) Received an Income Tax deduction of $900,000. This provided an additional tax benefit of $272,000. Total tax savings is $1,012,700. Client and Client’s wife receive income from the Charitable Trust for life providing an ongoing source of retirement income. Second, Client utilized a Structured Installment Sale for stock with a value of $3 million, which defers tax on the capital gain in the amount of $990,000 for 30 years. This provides an ability to invest more funds for retirement income that would otherwise be used to pay federal and state income taxes in the year of sale.

• Clients own a Distribution and Manufacturing Business operating as an S Corporation. That business is worth $2.7 million. Clients also own a commercial building which is worth approximately $2.7 million in which the business operates. Clients seek to retire and transition business and the building to their son. He has been working in the business for may years.

  The Business: The S Corporation stock was transferred to their son by means of a Qualified Subchapter S Trust (“QSST”) that included upstream basis provisions. When either client dies, son will receive a basis step-up to the fair market value at the date of death in the shares of the S Corporation. Another basis step-up is received when the surviving Client dies. This means that the business could be sold then for no capital gain tax.

  The Building: The building will be transferred to the son utilizing a structure that prevents the reassessment of property tax at transfer or upon the Client’s death. The property tax will not be reassessed for the son’s entire life. This provides a significantly higher return on investment from the building. The
  building will be held in an LLC which is held by the upstream basis trust described above. Client will receive a basis step-up upon the death of each of the Clients. This means that the building could be sold after those deaths with little if any reassessment. If the building is not sold, then the son’s basis will be increased to the fair market value at the date of death. This provides for higher depreciation deduction which also increases the return on investment from the building.

What is Exit Planning?

Exit planning is a strategic, forward-thinking process designed to help business owners smoothly transition out of their companies. It encompasses far more than just identifying a buyer; it’s about optimizing the value of your business, securing your financial future, and ensuring a seamless handover. This approach lays the groundwork for a successful transfer, whether you intend to sell to:

• Family members: Transitioning your legacy within the family requires careful planning to avoid conflict and ensure long-term success.
• Employees: An employee stock ownership plan (ESOP) or other internal transfer can motivate your team and create a stable future for the business.
• Third-party buyers: Positioning your business for an attractive sale requires strategic preparation to attract qualified buyers and negotiate the best possible deal.

By planning your exit proactively, you can address critical elements such as valuation, tax strategies, succession planning, and legacy preservation, ensuring that your business continues to thrive long after your departure.

Why Choose Goralka Law Firm for Your Exit Plan?

Our experienced team has a deep understanding of business law, taxation, and estate planning. We work closely with you to:

• Assess your goals and vision: What do you want to achieve with your exit?
• Evaluate your business: Identify areas for improvement and optimize its value.
• Develop a customized exit strategy: Tailored to your specific situation and objectives.
• Navigate legal and tax considerations: Minimize your tax burden and ensure a smooth legal transition.
• Negotiate favorable terms: Whether selling to family, employees, or a third-party, we can help you negotiate the best possible deal and improve the value of the sale.

Benefits of Exit Planning:

• Maximize your financial return: Strategic planning can significantly increase the sale price of your business.
• Ensure a smooth transition: Reduce disruption and maintain business stability during the handover.
• Reward your employees: An ESOP can motivate your team and provide a valuable financial benefit.
• Protect your legacy: Ensure your business continues to thrive after your departure.
• Peace of mind: Knowing your future is secure allows you to focus on the present and make informed decisions.

Building a Secure Future Together

Don't leave your exit planning to chance. Contact Goralka Law Firm today or call us at 916-440-8036 to schedule a consultation and start crafting a successful exit plan that meets your unique needs. We'll be your trusted advisor throughout the process, guiding you towards a prosperous and well-deserved future.

Interested in Learning More to Secure Your Family's Future? 

Read my detailed articles at the Kiplinger Advisor Collective, an exclusive professional organization for advisors, managers, and executives in personal finance.