Looking Ahead to Do More: Incorporating Charity into the Sale of Your Business

Most businesses were created out of necessity. A product or service is missing from the marketplace, and someone established a company to solve the problem. After successes and failures, discoveries and breakthroughs, that same company became profitable. And for some, there came a time when the owner was ready to sell their business to the next generation, or a third party. Does this story sound familiar?

But all too often, the sale of a privately-owned business can mean a loss for the community. Terry Horan’s story is different.

In his 50th year with HORAN, which also happened to be the 75th anniversary of when his father founded the business, Terry Horan completed a careful, 18-month journey to find the most suitable partner to acquire HORAN Health. As part of that process and to keep some of those dollars available for local philanthropy, he gifted a portion of ownership shares to Greater Cincinnati Foundation (GCF) and established a fund with the intention to support nonprofits regionally. By incorporating philanthropy into the sale of noncash assets, Terry was able to accomplish personal and professional goals in one transaction. According to Terry, “considering HORAN’s long history in Cincinnati, and our dedication to the nonprofit community, it was very important to us to maintain a local footprint for our charitable giving. We knew that using HORAN assets to create a fund at GCF would ensure that dollars would remain available for local charitable needs.”

Terry Horan is not alone in his wish to give back to the community that allowed his business to flourish. As Kevin McDonnell, former CEO of Skyline, puts it: “…our gift started with exploring how I could transition my ownership at Skyline and do good for our region. It was important for me to share with the community some of the good fortune my wife and I had.” Kevin and his wife Erica partnered with GCF to create the Skyline Chili Community Fund, gifting ownership shares of the company valued at $8 million to support quality preschool education for families with lower incomes.

What if you could help the community and realize significant tax savings in the sale of your business?

Donating part of your business to a donor advised fund can, in some cases, reduce your taxes and create a charitable account that you can use to support the organizations and causes you care most about over time. It is often a better option to cash, especially if the owner is already charitably inclined, has time to consider the best succession plan for their business, and has a great team of professional advisors to work through the details of the sale. At GCF, we refer to this unique transaction as Founder’s Philanthropy.

If your plan is to sell your business in the next 3-5 years, the time to start thinking about a charitable gift is now.

There are some considerations to keep top of mind today, so that you are ready to move forward with a sale that includes a charitable component. When selling your business to the next generation or to a third-party buyer, philanthropy is often ruled out because of a “buyer waiting in the wings.” Entering into any written, binding agreements can lead to a dead end with this type of charitable gift. If you aren’t sure what to do first, speaking with your legal team is a great place to start. Obtaining a qualified appraisal by a qualified appraiser is also important.

A thorough succession plan allows you to make the most of your sale, not only as a business owner but as a philanthropist. You might be selling to a company that takes your business away from the region that created your success, and a charitable gift keeps those dollars giving back to the community that gave you so much.

Are you – or your client – considering the sale of a business? Learn more about how philanthropy can play a role in the process at gcfdn.org/assets.

Content was originally published as part of an Advertising Supplement in the December 8-12, 2023 edition of the Cincinnati Business Courier, sponsored by the Goering Center for Family and Private Business.