Selling or Leaving a Business: Exit Planning Questions, Answered

What are the first steps?

Three to five years before you sell:

1. Get a formal valuation.
2. Clean up the books and separate personal expenses.
3. Train a manager who can run the business without you.
4. Review or sign a buy-sell agreement.
5. Plan your personal finances for life after the sale.

When should I start planning my exit?

Ideally three to five years ahead. That gives you time to raise the value, make the business less dependent on you, and plan the taxes.

Many owners wait until a health scare, a divorce, or a death forces a sale. That's when they usually get the lowest price.

Who could buy my business?

Usually one of four buyers: family, employees or a manager, a competitor or other strategic buyer, or an outside investor. Each pays differently and moves at a different speed.

An inside sale can protect your people. An outside sale often pays more up front.

How is a business valued?

Mostly on its cash flow, and on how risky that cash flow looks to a buyer. Clean, consistent books, repeat customers, and a team that runs without you all raise value. Get a formal valuation before you set a price.

How is the sale of a business taxed?

It depends on what's sold and how. In an asset sale, buyer and seller both report how the price is split among the assets on IRS Form 8594, and each piece can be taxed differently.

Long-term capital gains are taxed at 0%, 15%, or 20%, depending on income. The 3.8% net investment income tax can apply above $200,000 single or $250,000 joint (IRS rules as of 2026).

Can I spread out the tax?

Sometimes. With an installment sale, you receive payments over several years and generally report the gain as you're paid (IRS Publication 537). That can keep you in lower brackets. The risk is that the buyer has to keep paying.

What if my husband ran the business and he died?

Act quickly to protect its value: customers, key employees, and bank relationships. Look for a buy-sell agreement. It may already say who buys his share and at what price, often funded with life insurance.

His share of the business may get a new cost basis at his death, which can lower the tax if it's sold soon.

What happens to my money after the sale?

Plan it before you sign. Set aside the tax first. Decide how much you need for living costs, and invest the rest for income.

Also plan your days. Many owners feel lost after the exit. Knowing what's next makes the sale easier to finish.

What paperwork closes a business in Illinois?

If you close instead of selling, a corporation files articles of dissolution and an LLC files a statement of termination with the Illinois Secretary of State. You also file final federal and state tax returns and cancel licenses and permits.

The SBA has a step-by-step checklist for closing or selling a business.

What is a buy-sell agreement?

It's a contract among owners that says what happens to an owner's share if they die, become disabled, divorce, or leave. It sets who can buy and how the price is set.

Life insurance often funds it, so the money is there when it's needed. Review it every few years. An old price can be badly out of date.

How do I make my business less dependent on me?

Write down how the work gets done. Put key customer relationships in more than one person's hands. Give a manager real authority.

Buyers pay more for a business that runs well while the owner is on vacation.

Should my children take over the business?

Only if they want it and can run it. Ask them directly, and early. Then test it: give them real responsibility for a few years before the handoff.

Be fair to the children who don't join the business, too. Life insurance or other assets can help balance what each child receives.

Education, not advice. Every family is different. Talk with your own tax, legal, and financial professionals before you act. Figures are 2026 amounts from the official sources below and can change.