Tax treatment depends on your circumstances and the jurisdictions involved. This page is a guide to the questions worth raising; your tax and legal advisers advise on the answers.
1. Understand what you would retain
Ask your tax adviser to estimate your after-tax proceeds under the transaction structures that are realistically possible, such as a sale of shares or of assets, or a sale with part of the price deferred. The estimate should separate cash available at closing from amounts held in escrow, deferred payments, earn-outs and any retained or rollover equity. It should also show when tax falls due against when the cash actually arrives, since the two do not always line up. A higher headline offer does not necessarily produce the better personal outcome. See From price to proceeds.2. Review eligibility for relevant tax reliefs
Some jurisdictions offer reliefs on the sale of qualifying business interests. Examples include qualified small business stock treatment in the US, the lifetime capital gains exemption for qualifying shares in Canada, and Business Asset Disposal Relief in the UK. These are examples only: each has its own conditions, none applies to every owner, and they are not interchangeable across countries. Eligibility often turns on facts that are hard to change late, so ask your adviser to review them early:- When and how you acquired your shares, and your tax basis in them
- The company’s ownership history, including past issues, transfers and reorganizations
- The company’s legal and tax status, and how it has operated over the qualifying period
- Any other conditions the relevant relief sets, and what could cause you to lose it
3. Consider family ownership, gifts and trusts
If you intend to transfer wealth to family members, review whether gifts, trusts or changes to ownership would support those objectives before a sale. The analysis should distinguish any effect on the sale’s tax treatment from estate or inheritance planning benefits. It should also address control, access to proceeds, beneficiaries, valuation, administration and the consequences if the sale does not proceed. A trust is a legal arrangement with its own consequences, rather than an automatic tax saving. Establishing or funding one may create tax liabilities, reporting obligations or restrictions that are difficult to reverse.4. Review charitable intentions early
If you already intend to give to charity, discuss with your advisers whether giving shares before a sale or donating cash afterwards better fits your objectives. Timing, the valuation of the shares, whether the recipient can accept and hold private company shares, and how far sale negotiations have progressed can all affect the analysis. Charitable giving is a way to support causes you care about; it is not a means of keeping the proceeds while avoiding tax.5. Check company structure and cross-border issues
Review whether the company’s legal entity and ownership structure support the transaction you anticipate and any reliefs you may rely on. Tell your advisers, and us, early about:- Shareholders who live in different countries
- Shares held through trusts or holding companies
- Assets or operations outside your home country
- Any change of residence you are considering