For clients who may sell a business, the time to think charitably is right now

Business brokers may tell you that many owners fail to optimize—and sometimes even compromise—the value of their business’s proceeds by rushing the process, hastily determining an asking price or not fully assessing the value of their business to a potential buyer. In their haste, owners often miss strategies that can deliver an improved post-sale result and a true reward for their years of work. Making a gift of appreciated stock with privately held business assets is a valuable strategy for charitable clients that can be easily missed if not planned for in advance of a sale.

Greater Cincinnati Foundation (GCF) can be a valuable resource as you guide a business owner client through a pre-sale preparation process. This is especially true for a business that has operated for many years and has accumulated significant unrealized capital gains in its valuation – and likely to be heavily taxed at the time of the sale. 

Many closely held business owners and their advisors may not be fully aware of the advantages of giving shares to a donor advised fund well in advance of any external discussion about a potential sale of the business. With prudent planning, the gifted shares will be free of capital gains at sale time, allowing the proceeds to flow into the fund, ready to be deployed to meet the business owner’s charitable goals. The business owner also benefits because they’ve reduced the value of their taxable estate. This can have huge repercussions given the anticipated reduction of the estate tax exemption slated for 2025. 

Two major considerations for gifting assets through the sale of your client’s business:

  1. It will be necessary to secure a qualified appraisal of the business by a qualified appraiser when the business owner makes a gift of shares to comply with IRS requirements for documenting the value of the charitable deduction. 
  2. Critically important to successfully executing this strategy is that clients avoid signing any binding agreements for the sale of the business prior to making the gift to GCF.

The time to have these conversations with clients who are business owners is to have them early and often. Please reach out to us if a client would like to explore the idea of giving a portion of their business to a fund at GCF. We can work alongside you and the client to optimize the exit and maximize the resulting proceeds for charitable means.

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