Selling Your Florida Business: Tax & Transition Steps You're Missing

What you'll walk away with from a business sale isn't determined by the purchase price — it's determined by how well you planned before the deal closed. In this episode, we're pulling back the curtain on the tax and transition steps that Florida business owners consistently overlook when selling companies valued between $1M and $50M or more. From deal structure decisions that reshape your federal tax burden to the post-sale wealth management gaps that can quietly erode years of hard work, we cover the full picture most advisors never bring to the table. As a fee-based fiduciary, I walk you through what genuine financial planning looks like during one of the most complex and consequential events of your financial life. If you're a Florida business owner thinking about an exit — now or in the next few years — this episode is essential listening. Ready to talk? Schedule a complimentary discovery call at TDWealth.net. For educational purposes only. Not investment advice. 📖 Full show notes: https://tdwealth.net/selling-your-florida-business-tax-transition-steps-youre-missing/

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Davies Wealth Management

684 SE Monterey Road

Stuart, FL 34994

772-210-4031

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Davies Wealth Management makes content available as a service to its clients and other visitors, to be used for informational purposes only. Davies Wealth Management provides accurate and timely information, however you should always consult with a retirement, tax, or legal professionals prior to taking any action.

Transcript

SPEAKER_02 0:00

Welcome to the deep dive. You know, whether you are actively building a business right now, or maybe you're advising an entrepreneur, or honestly, if you're just fascinated by the um kind of hidden mechanics of high net worth wealth management, we are really thrilled you are joining us today.

SPEAKER_00 0:17

Yeah, it's uh it's a topic that affects so many people, but is rarely talked about in plain English.

SPEAKER_02 0:22

Exactly. And our mission today is really decoding that highly complex high-stakes process of selling a business. We are looking at a very comprehensive guide from Davies Wealth Management.

SPEAKER_00 0:34

Right. They're a fee-based fiduciary advisor down in Stewart, Florida.

SPEAKER_02 0:37

Yeah, Stewart, Florida. And they publish this roadmap titled Selling a Business in Florida Seven Critical Tax and Transition Steps Most Sellers Skip. But you know, before we get into the weeds, I want to start with the hook, the most counterintuitive point from this entire text. The purchase price. Right. When selling a business, the number that matters least is actually the purchase prize on the contract. I know it sounds totally wrong, right? It does. Because we all have this like cinematic image in our heads. The confetti is falling, the champagne pops, and you look at that contract and see, say, $10 million, and you think, I've won.

SPEAKER_00 1:12

Right. The score is settled, you have your number.

SPEAKER_02 1:15

Aaron Powell But the guide argues that number is an illusion. What actually matters is what you keep after federal taxes, the deal costs, and um these transition gaps are fully accounted for.

SPEAKER_00 1:26

Yeah, because depending on the structure, two people could sell a business for $10 million and walk away with wildly different amounts of actual wealth.

SPEAKER_02 1:32

Aaron Powell Okay, let's unpack this because I think um before we can even talk about how to protect the money, we really have to understand exactly how the IRS plans to tax the sale in the first place.

SPEAKER_00 1:43

Absolutely. You have to know the rules of the game. And the single largest tax lever you have, the biggest one, is whether this is an asset sale or a stock sale.

SPEAKER_02 1:50

Right. The deal structure.

SPEAKER_00 1:51

Yeah. And buyers and sellers want completely opposite things here. In a stock sale, the buyer is basically just buying your legal ownership interest. They buy the whole entity.

SPEAKER_02 2:00

Warts and all.

SPEAKER_00 2:01

Warts and all. And for you, the seller, this is the dream, right? Because generally that means you're looking at long-term capital gains rates.

SPEAKER_02 2:10

Which are much lower.

SPEAKER_00 2:11

Much lower. For 2026, you're looking at, you know, a 15 to 20 percent federal capital gains rate, plus maybe that 3.8% net investment income tax. It's highly favorable to you.

SPEAKER_02 2:25

Aaron Powell, but buyers hate that, don't they?

SPEAKER_00 2:26

Oh, they despise it. They don't want your legal history or your potential liabilities. They want an asset sale. They just want to buy the desks, the equipment, the customer list. Just the pieces. Just the pieces. Because if they buy the pieces, they get what's called a stepped-up basis. Trevor Burrus, Jr.

SPEAKER_02 2:42

Meaning they can write it off.

SPEAKER_00 2:43

Exactly. They get to place a brand new market value on that equipment and depreciate it all over again against their own future taxes.

SPEAKER_02 2:49

Aaron Powell Okay. But if the buyer gets all these new tax deductions, the IRS has to get their money from somewhere. Trevor Burrus Right.

SPEAKER_00 2:56

And that somewhere is you, the seller. If you agree to an asset sale, you get hit with something called depreciation recapture. Yeah, it's brutal. You've been taking deductions on that equipment for years, and now the IRS says, hey, you sold it for a profit. We want those old deductions back. And they tax that at your ordinary income rate, which, you know, can be up to 37%.

SPEAKER_02 3:16

Wow. So it's um uh it makes me think of like selling a classic car, you know. A stock sale is like I just sell you my entire pristine 1967 Mustang, hand over the keys, and I walk away clean.

SPEAKER_00 3:30

Clean break, yeah.

SPEAKER_02 3:31

But an asset sale is like the buyer forcing me to dismantle the car in my driveway and sell them the engine and the tires and the seats completely separately, yeah. Just so they can like write off the individual parts.

SPEAKER_00 3:43

That's a really great way to visualize it. It's a mess for you.

SPEAKER_02 3:46

So since the buyer and seller want completely opposite things here, who usually has the upper hand in these negotiations?

SPEAKER_00 3:53

Aaron Powell What's fascinating here is that the leverage is entirely dictated by who plans earlier.

SPEAKER_02 3:57

Really?

SPEAKER_00 3:58

Just timing.

SPEAKER_02 3:59

Yeah. I mean, if you wait until a buyer drops a letter of intent on your desk, the buyer has all the power.

SPEAKER_00 4:04

Yeah.

SPEAKER_02 4:05

They've already baked an asset sale into their offer price.

SPEAKER_00 4:07

Oh wow. But if you plan ahead, the Davy source notes that negotiating the structure is often worth more than a five percent move in the purchase price itself.

SPEAKER_02 4:16

Aaron Powell So on a ten million dollar deal, that's half a million dollars just hanging on how the lawyers define the sale.

SPEAKER_00 4:22

Exactly. And since we're looking at a Florida-based guide, we have to talk about the Florida edge too.

SPEAKER_02 4:27

Aaron Powell Right. The geography of it all. Because properly domiciled Florida residents pay zero state-level capital gains tax.

SPEAKER_00 4:34

Zero. Which is massive. If you have a $5 million gain, selling as a Florida resident saves you um roughly $300,000 compared to selling that exact same business in like California or New York. Trevor Burrus, Jr.

SPEAKER_02 4:48

But the guide is super strict about that word domiciled. You can't just rent an Airbnb in Stewart for a month and claim you live there.

SPEAKER_00 4:54

Right. Absolutely not. The state tax boards in places like New York are relentless. Proper documentation is non-negotiable. We're talking homestead exemptions, voter registration.

SPEAKER_02 5:03

Where your dog is registered.

SPEAKER_00 5:04

Literally, yeah. Where your primary care doctor is. You have to prove it's your real permanent home.

SPEAKER_02 5:09

Aaron Ross Powell Okay. So this all transitions us perfectly into the timeline. Because the deal structure and your state domicile are so rigidly defined by tax law, it sounds like the actual work of selling a business has to start way before a buyer even exists.

SPEAKER_00 5:23

Years before. The window for meaningful tax strategy closes well before the deal does. Sellers really need a 24 to 36 month runway.

SPEAKER_02 5:32

So two to three years of presale planning. Let's dig into that runway because there are a few tools in the source that just blew my mind. Starting with QSPS.

SPEAKER_00 5:41

Section 1202, qualified small business stock. It is incredible.

SPEAKER_02 5:45

It says that C corporation owners who have held their stock for five plus years can potentially exclude up to $10 million in capital gains from federal taxes. Wait, really? $10 million?

SPEAKER_00 5:55

Up to $10 million or 10 times their basis, yeah.

SPEAKER_02 5:58

Yeah.

SPEAKER_00 5:58

Completely tax-free.

SPEAKER_02 5:59

That sounds illegal. Like a loophole.

SPEAKER_00 6:01

I know. It sounds like some shady internet forum advice, but it's totally legitimate. It was designed to encourage investment in small businesses. But you have to be a C corporation for five years. So if you're an LLC right now.

SPEAKER_02 6:12

Which most people are.

SPEAKER_00 6:13

Right. You can't just convert to a C Corp the week before you sell and expect to get the tax break. That's why you need that runway.

SPEAKER_02 6:20

Got it. The guide also talks about installment sales during this pre-sale phase, basically saying you don't have to take all the money at once.

SPEAKER_00 6:28

Yeah, and often you shouldn't. If you take a massive lump sum, you get pushed into the highest possible tax bracket, that 23.8% federal rate threshold. Right. But if you spread the gain out over multiple years, you manage your tax bracket. Plus, it really helps with estate planning, especially with the federal estate tax exemption limit scheduled to sunset around $14 million in 2026.

SPEAKER_02 6:49

Okay. And what about the charitable side? The guide mentions donor-advised funds or DFs and charitable remainder trusts, CRTs.

SPEAKER_00 6:57

Yeah, if you're philanthropic, these are amazing. But again, timing is everything. You must fund these trusts with your business interests before the sale closes.

SPEAKER_02 7:05

Before. Why before?

SPEAKER_00 7:07

Because if you wait until after, you're donating cash that has already been taxed. If you donate the actual company shares before the sale, the trust which is tax exempt sells the shares and pays zero capital gains.

SPEAKER_02 7:20

Wow. So what does this all mean for the lucky entrepreneur who gets an unexpected massive buyout offer out of the blue? Like someone knocks on their door tomorrow with a ridiculous number. Are they essentially being penalized for success because they didn't set up a CRT or QSBS three years ago?

SPEAKER_00 7:38

I wouldn't use the word penalized. They're still going to be very wealthy, but it's about efficiency, you know? They are going to pay retail tax rates instead of wholesale.

SPEAKER_02 7:46

Ah, I like that. Retail versus wholesale taxes.

SPEAKER_00 7:49

Exactly. Without that 36-month runway, a lot of the best tools are just off the table.

SPEAKER_02 7:54

Which brings us to the year of the sale. Because if the pregame is all about these long-term structures, the actual year of the sale seems like a frantic sprint to use every remaining tax deferral vehicle before the window permanently slams shut.

SPEAKER_00 8:07

Frantic is the right word.

SPEAKER_02 8:09

It's like um trying to pack a parachute while you are already jumping out of the plane.

SPEAKER_00 8:13

That is exactly what it feels like.

SPEAKER_02 8:14

You've got this massive illiquid asset instantly converting to cash, and you're frantically trying to stitch it all together before you hit the ground.

SPEAKER_00 8:22

Yes. And a big part of stitching that parachute is retirement maximization. Because this is often the last year to make massive contributions as a business owner.

SPEAKER_02 8:31

But how much can you really hide in a retirement account? A solo 401k is what, like 70K in 2026?

SPEAKER_00 8:38

Right. 70K is nice, but it doesn't solve a $10 million tax problem. That's why advisors look at defined benefit or cash balance plans.

SPEAKER_02 8:46

Okay, what are those?

SPEAKER_00 8:47

They're essentially custom pension plans. Depending on your age and income, you can sometimes funnel $200,000 or more into these plans in that final year, fully deductible.

SPEAKER_02 8:57

Oh wow. So you're just wiping $200,000 right off your taxable income.

SPEAKER_00 9:00

Exactly. And another big emergency parachute is the qualified opportunity zone or QOZ.

SPEAKER_02 9:06

Right. The guide mentioned this. This is for people who didn't have the three-year runway right now.

SPEAKER_00 9:10

Yeah. If you close the sale and you have all these capital gains, you have exactly 180 days to re-indust those gains into a QOZ.

SPEAKER_01 9:19

180 days. The clock is ticking.

SPEAKER_00 9:21

Loudly. But if you do it, you defer the taxes on those initial gains. And even better, if you hold that QOZ investment for 10 years.

SPEAKER_02 9:30

10 years, okay.

SPEAKER_00 9:31

You potentially eliminate the federal tax on all the new appreciation from that investment.

SPEAKER_02 9:36

So the initial gain is deferred, but the new growth is totally tax-free.

SPEAKER_00 9:40

Exactly. It's a powerful tool if you're in that free fall.

SPEAKER_02 9:44

We also need to touch on the estate planning timing in that year of sale. Things like slats, spousal lifetime access trusts, or GERTs. The guide says transfer the business interest to these trusts before the sale at a lower valuation rather than trying to move cash post sale.

SPEAKER_00 10:02

Right. Because before the sale, your business is a private, illiquid asset. Appraisers can apply a discount to its value.

SPEAKER_02 10:09

Because it's hard to sell.

SPEAKER_00 10:10

Exactly. So you use up less of your lifetime estate tax exemption when you gift it. Once it's a pile of cash post sale, a dollar is a dollar. There's no discount anymore. This raises an important question, though, about the kind of advice these sellers are getting.

SPEAKER_02 10:22

How so?

SPEAKER_00 10:23

Well, a high net worth business seller requires totally different advice than a mass market investor. You know, mass market is all about target date funds and basic wills.

SPEAKER_02 10:32

Right. A standard playbook.

SPEAKER_00 10:33

Yeah. But a business exit requires QOZs, dynasty trusts, valuation discounts. The standard playbook completely breaks down here.

SPEAKER_02 10:42

Aaron Powell Which leads us to the biggest trap of all. Because all of this careful maneuvering, you know, the stock sale, the trusts, the QOZs, it all leads to this transition step that the Davies Wealth Management Guide says almost every seller skips. And it happens the day after closing.

SPEAKER_00 10:58

The post-closing reality check.

SPEAKER_02 11:00

Here's where it gets really interesting. Imagine this. The seller gets, say, $6.5 million after tax is wired to their account. They log in, they see the number, and they immediately step into what the guide calls the cash trap.

SPEAKER_00 11:13

Yeah, because suddenly you have $6.5 million sitting in a bank account, and FDIC insurance only covers $250,000.

SPEAKER_02 11:21

Right. So most of that money is totally uninsured if the bank goes under.

SPEAKER_00 11:24

It's terrifying when you realize it. So usually you have to spend 60 to 90 days safely warehousing that cash in T-bills or money market accounts before you rush into any permanent investments.

SPEAKER_02 11:36

But think about the psychological whiplash there. You go from being a risk-taking entrepreneur who thrives on action, making 100 decisions a day, to suddenly being told to just sit on T-bills for 90 days. How difficult is it for these sellers to fight the urge to immediately put the money to work?

SPEAKER_00 11:55

It's incredibly difficult. They feel like they're losing out or that inflation is eating their money. But if you rush into complex illiquid investments just to feel productive, you can create massive expensive tax problems. You have to just sit on your hands for a minute.

SPEAKER_02 12:08

And while they're sitting on their hands, they have to deal with replacing their income, right? Because they just lost their business salary. Trevor Burrus, Jr.

SPEAKER_00 12:13

And all the perks the cell phone, the car, the health insurance. The guide recommends carving out a 12 to 18 month cash reserve bucket immediately.

SPEAKER_02 12:22

Just to live on.

SPEAKER_00 12:23

Yeah, just to pay the grocery bill. Because you want your new tax managed equity portfolio to remain fully invested. You do not want to be forced to sell stocks at a loss just to fix your roof.

SPEAKER_02 12:33

Using the tax managed equity portfolio, the guide mentions strategies like direct indexing.

SPEAKER_00 12:38

Right. Instead of buying one S P 500 fund, you buy the individual stocks. That way, if a few stocks dip, your advisor can sell them to capture the tax loss, which helps offset the massive gains from your business exit.

SPEAKER_02 12:50

It's so strategic. But okay, I have to bring up the one trap that I just could not believe the IRMAA time bomb.

SPEAKER_00 12:57

Oh, yes. Medicare.

SPEAKER_02 12:59

Like Medicare. Seriously, these people are multimillionaires now. Why are they sweating over a Medicare surcharge?

SPEAKER_00 13:05

Because it's a massive hidden leak in their cash flow planning. IRMAA is the income-related monthly adjustment amount. And Medicare uses a strict two-year look back period.

SPEAKER_02 13:15

So a massive income spike from a business sale in 2026.

SPEAKER_00 13:18

Guarantees that you will pay the absolute maximum Medicare Part B and Part D surcharges in 2028.

SPEAKER_02 13:24

Wow. Two years later, just bam.

SPEAKER_00 13:26

Bam. And if your team doesn't warn you, you might accidentally trigger other taxable events in 2028, compounding the problem.

SPEAKER_02 13:34

This is exactly why the guide insists that you need a lead financial advisor who is a fee-only fiduciary, not a commission-based broker.

SPEAKER_00 13:43

Exactly. A commission-based broker is often incentivized to sell you products. But a fee-only fiduciary is legally obligated to act in your best interest.

SPEAKER_02 13:52

You need someone to basically orchestrate the MA attorney, the CPA, the estate planners, just to make sure they're all talking to each other.

SPEAKER_00 13:59

If we connect this to the bigger picture, it really highlights how mass market financial advice just falls apart for a concentrated business exit. You need a quarterback for all these moving parts.

SPEAKER_02 14:09

Well, this has been an incredible deep dive. So what does this all mean for you listening? Basically, selling a business is not the finish line, it is the starting line of a highly complex financial chapter. You know, from negotiating a stock over an asset sale to that 36-month runway for QSBS to dodging the IRMAA Medicare trap. The ultimate goal here is wealth protection.

SPEAKER_00 14:31

Protecting what you've built, exactly.

SPEAKER_02 14:33

But before we go, I want to leave you with a final thought to mull over. We've talked extensively about the financial transition, the T bills, the trusts, the taxes. But consider the human transition for a moment.

SPEAKER_00 14:46

Yeah, the emotional side.

SPEAKER_02 14:47

If an entrepreneur's entire identity, their social circle, their daily structure for decades was tied to running this company, what actually happens to their sense of purpose on the Monday morning after that $10 million wire hits?

SPEAKER_00 15:01

It's a void. The financial plan might be laid out perfectly by their fiduciary, but if the emotional plan is completely blank, they're gonna struggle.

SPEAKER_02 15:09

Right. You have all the money in the world, but you don't know who you are without the business. It's a profound transition. Thank you so much for joining us on this deep dive. Really hope this encourages you to view your own wealth transitions with a more critical eye. We'll see you next time.