💸 How to save millions in taxes on your exit

98% of founders who sell their business miss out on saving MILLIONS due to poor planning.

I’m currently in the process of reviewing exit planning for one of the entities I'm a minority owner of…

With some help from Nate Ruben – a certified exit planning advisor – and DAMN…

I had NO idea how nuanced selling your business was.

Nate told me there are 3 things you should know when it comes to selling your business…

And that taking the proper estate planning steps prior to selling your business can save you millions of dollars in reduced tax liability.

Today, we’ll cover his first important concept:

Trusts

A trust is a legal arrangement that allows a third party, called a trustee, to hold assets for the benefit of one or more beneficiaries.

Trusts can be structured in many ways, and can specify how and when the assets will be passed to the beneficiaries.

Common reasons for a trust include:

• Asset protection (from creditors, predators, and even family)

• Probate avoidance (keeping your assets from the state in the event of your passing)

• Tax planning (reducing income taxes, lowering estate taxes)

Setting up a trust prior to your exit can be one move that can save you millions.

Trusts reduce tax liabilities when you sell

The reason so many founders get F’d with taxes when they sell their business is that selling a business is typically structured as an asset sale or a stock sale.

When a transaction is structured as an asset sale, the seller is exposed to income tax gains, as well as capital gains.

Depending on the corporation structure, such as C-corporation, there may be a double taxation event (first at the corporate rate on the proceeds of the sale, and then at the individual rate on the distributions).

Depending on the sale, taxation on an asset sale can be as high as 40-60% when corporate and personal taxes are combined!

By shifting some or all of a business into the proper trust, it’s possible to greatly reduce, if not outright eliminate much of the tax liability from the sale.

Estate Tax

The wealthiest families in the world understand true wealth is created from asset preservation.

If you’re like me, and aren’t inheriting anything crazy, this is a new concept as a business owner that I had to learn.

Here’s a mind blowing stat for my US readers:

As of July 2024, each US citizen has an estate tax exemption of $13.61 million ($27.22 million for couples), and is also referred to as a “coupon”.

You can leverage your trust to gift up to $27.22M to the next generation before taxation.

Nate introduced me to the concept of strategic gifting, where you can preserve your coupon (or reduce how much of your estate tax exemption is used) by strategic gifting.

For example…

Let’s say you have a business that’s currently worth $1 million dollars.

Perhaps you and your estate planning attorney decided that you should gift 25% of your business to a trust for the purpose of reducing business sale taxation liabilities.

Today, that would mean you are gifting $250k to your trust.

However, because it’s hard to sell 25% of your business, the government allows you to discount the value of the gift by 50%.

Now, that gift is worth $125k.

This is a great way to preserve your coupon and make the most of your federal estate tax exemption.

Fast forward three years…

Your business is now worth $10 million dollars and you decide to sell.

That 25% of the business is now worth $2.5 million dollars, and since it’s already in your trust, it is no longer subject to the same taxation as the other 75% of your business.

Further, you still only gifted $125k out of your estate, not the $2.5 million the gift is now worth.

Simply put… by doing advanced planning, you could have 20x’d your money in a trust that’s not subject to taxation on that growth!

I know this can sound boring or overwhelming, but if you’re a founder that cares about legacy, it's imperative. 

Nate has been an instrumental asset to me and many of 8F’s clients.

If you want to explore more about these concepts, you can book a call with him here.

Is Your Agency Built for a Lucrative Exit?

While exit planning is crucial, the foundation of a valuable agency lies in its operations, systems, and management.

At 8 Figure Agency, we specialize in helping agency owners like you create predictable cash flow, increase profit margins, and consistently hit your goals year after year.

We've helped over 800 agencies achieve these outcomes…

By helping them:

• Build systems that run smoothly without needing constant oversight

• Consistently deliver high-quality work, delighting clients

• Streamline operations, letting operators focus on strategic growth

• Set up clear and effective management

• Establish proper data tracking and reporting habits, to guide them while they scale to 7 and 8 figures

Without major operational challenges…

You can massively set yourself apart from your competition, and grow your agency to its full potential.

Interested in seeing how we can help you?

👉 Schedule a 30-minute call with our team here 👈

We’ll do a quick intake of your current operations…

And lay out a customized plan on how you can unlock your agency's path to 8 figures and beyond.

PS: Tomorrow in the 8F community, our first ever guest speaker is going to be hosting a masterclass on how agency owners can build a cold email system that will book 10-20 calls/mo for ~$500/month. This is one you won’t want to miss. Join the 8F community for free, and tune in tomorrow (8/6) at 1:30 EST.