Selling the Family Business: What Happens After the Check Clears?
For many small business owners, the business is more than an asset, it’s a piece of your identity and often the backbone of your family’s income. That’s why selling it is never just about price or tax treatment. It’s about what comes next for you and the people who helped build it with you.
If your children work in the business, or if your family depends on the income it generates, selling can trigger questions you may not be emotionally, or financially, ready to answer.
So before you sign on the dotted line, let’s talk through some of the bigger, often overlooked issues that come with selling a family-owned business.
Before you commit to a sale, it’s worth asking:
How will your non-retired family members make money after the sale?
Will they keep their jobs? Or will they need new plans?What happens to the proceeds?
Will you take a lump sum, spread it out for tax purposes, or share it with family?What role will you play after the sale?
Will you stay involved for a transition period—or walk away entirely?Is your family prepared for a financial windfall?
How might sudden wealth change behaviors, relationships, or spending?Is your family emotionally ready for the lifestyle shift?
The business likely shaped more than just your income—it shaped your family’s identity.And perhaps most importantly: Is this a clean transaction—or a transition of legacy?
In this article, we’ll walk through these questions and share real-world stories from business owners who’ve been there. If you’re thinking about selling, now is the time to start thinking through what comes after the deal, not just for you, but for everyone tied to the business.
How Will Your Family Make Money After the Sale?
When you sell your business, the income it once provided disappears. You may receive a large payout—but what happens to your family members who worked there? If they’ve built their careers under your roof, are they ready for life without the business?
Here are a few key questions to ask:
Will your children or spouse keep their jobs under the new ownership?
If they’re adding value and want to stay, many buyers are open to retaining key team members—especially during the transition period.If they aren’t retained, what’s the plan?
Have they built outside skills or experience? Or have you always assumed the business would always be their safety net?
Real Story
I worked with a family where the father had built a thriving business alongside his wife and two children. When he passed away unexpectedly, there was no succession plan in place. While the family was still grieving, the business began to fall apart. The children, who had only ever worked for their father, weren’t prepared to step up or find work elsewhere. Within months, both kids were jobless and leaning heavily on their mother—who was also facing her own financial struggles in a sudden, unplanned retirement.
Eventually, we worked together to clean up the family’s debts, restructure their cash flow, and create a plan that allowed the mother to live comfortably again. But it didn’t have to be that hard. Even though this wasn’t a planned sale, the outcome revealed a bigger truth: a family business without a plan is a risk to everyone who depends on it.
Planning ahead—even just talking through the “what ifs”—can make all the difference. If you're considering a sale, don’t just think about the business. Think about the people who built their lives around it.
What Happens to the Sale Proceeds?
Selling your business can result in a significant windfall. Most of the time, the proceeds are taxed as long-term capital gains—typically between 0% and 20% at the federal level in 2025, plus a 3.8% surtax for high-income earners and state taxes if applicable. That’s far more favorable than ordinary income rates, but just because the tax rate is lower doesn’t mean the planning is simple.
Here are a few key questions to think through:
Should you use an installment sale?
Spreading the income over several years can help you stay in a lower tax bracket while giving you more flexibility with investments and distributions.Is it smarter to gift proceeds instead of paying bonuses to family?
Bonuses are taxed as income for both you and the recipient. Gifting a portion of proceeds (up to $19,000 per person in 2025) may be a more tax-efficient way to reward family members without pushing them into higher tax brackets or triggering payroll taxes.Would a Family Limited Partnership (FLP) help?
FLPs can allow you to shift ownership interest in the business to family members before a sale, centralize decision-making, and potentially reduce estate tax exposure. But this strategy requires careful coordination with your legal and tax team.
Real Story
This one hits close to home. My father is a business owner, and one day he’ll eventually sell his company. As his son—and a financial planner—I’m fortunate to be involved in his planning process early. One conversation we had stood out: he could offer retention bonuses through payroll to keep his most loyal employees in place. But instead, he plans to reward them using a portion of the sale proceeds. Why? Because it allows him to avoid employment taxes and give more directly to the people he considers part of the family.
It’s a powerful reminder that there’s more than one way to support the people who helped build your success. With the right planning, you can take care of them—and your future—at the same time.
What Role Will You Play After the Sale?
Selling your business doesn’t mean you vanish overnight—but it does mean your day-to-day life is about to change. For many owners, the emotional shift is just as significant as the financial one.
Take time to ask yourself:
Will you remain involved in a consulting role or as a board member?
Do you want to walk away completely and begin a new chapter?
How will you structure your time, your sense of purpose, and your relationships after the sale?
If you’ve always been “the boss,” stepping back can feel like a loss of identity. But handled thoughtfully, it can also become an opportunity to reset your priorities and refocus your energy on things that matter most.
Real Story
One of my clients owned a successful pest control company. He was used to being in the field, constantly moving, solving problems, and making customers happy. Revenue wasn't his main driver—relationships were. When we began planning for his sale, we spent just as much time talking about what his first year post-sale would look like as we did talking about deal structure.
The first few months were easy—he traveled, spent time with family, and played more golf. But by month four, the restlessness kicked in. He missed the routine, the problem-solving, and even the early morning calls.
Planning for this emotional transition ahead of time helped him find a new rhythm before things felt empty. He joined a nonprofit board, began mentoring other business owners, and eventually consulted part-time in his industry.
This isn’t just about what’s next for your money—it’s about what’s next for you.
Are Your Family Members Ready for a Windfall?
Sudden wealth changes things. It can unlock freedom, create opportunities, and solve a lot of practical problems. But if your children, grandchildren, or even your spouse aren’t emotionally or financially prepared to manage large sums of money, that same windfall can quickly become a source of stress—or regret.
Before the business is sold, ask yourself:
Will this change how they live, spend, or see themselves?
Will it impact their work ethic or sense of purpose?
Are you worried about unhealthy behaviors—overspending, entitlement, or strained relationships?
These are uncomfortable questions. But ignoring them can cause real damage down the line.
For families with younger generations, sudden wealth can create unrealistic expectations about money. I’ve seen kids lose motivation to work or pursue education because they thought, “Why bother? The money will always be there.” Without guidance, even well-meaning heirs can make poor decisions that threaten the long-term benefits of a sale.
How to Protect the Money—And the People Who Receive It
If you’re concerned about how wealth will be handled, you’re not alone. Fortunately, there are tools and strategies that allow you to share wealth without giving up control.
Trusts – A trust can hold assets on behalf of a child, grandchild, or spouse while outlining how and when those assets can be accessed. You can structure it to pay for education, housing, healthcare, or other life milestones, and prevent reckless withdrawals.
Custodial Accounts – These are simpler accounts (like UTMA or UGMA) that allow you to gift money to minors while maintaining some control until they reach the age of majority. They’re useful for educational savings or small gifts but don’t offer the protections of a trust.
Annual Gift Exclusion – In 2025, you can gift up to $19,000 per recipient tax-free ($38,000 per couple). This strategy allows you to transfer wealth slowly over time without eating into your lifetime estate tax exemption. It’s one of the most effective tools for reducing your taxable estate while helping your family now.
Real Story
One client I work with is a grandfather who owns a successful business and holds assets well above the lifetime estate exemption. He’s deeply generous—but also realistic about the risks of giving too much, too soon.
To protect his legacy and reduce estate taxes, he and his wife gift the maximum annual exclusion amount each year. They spread those gifts across children, grandchildren, and even in-laws. This strategy reduces the size of their taxable estate, provides real financial help during their lifetime, and gives them peace of mind knowing they’re protecting their family from becoming too reliant—or too loose—with sudden money.
It’s not just about handing over wealth. It’s about preparing your family to receive it with wisdom and purpose.
Are You Rushing the Process?
Selling a business is one of the most important—and emotional—decisions a family can make. Even if you feel ready, the rest of your family may not be. And if you’re not emotionally prepared, even a great offer can turn into a bad experience.
One advisor put it best in CityBiz:
“Don’t wait until you’re done. You need time to prepare, build your team, and weigh your options.”
That advice is especially true for family-owned businesses.
Maybe your son or daughter isn’t ready to take over today—but might be in a few years. Maybe a grandchild is showing interest and maturity. Or maybe no one in the family wants the responsibility, and selling to a third party is the right choice—but you haven’t yet explored all your options.
Either way, the key is to pause and plan before making any final decisions.
Consider the Timing—Both Financial and Emotional
Waiting too long can be just as risky as rushing. As business owners age, energy levels decline. Cognitive sharpness may fade. The sale process can take 6–18 months from start to finish, and it requires focus, clarity, and stamina. It’s easy to get emotionally worn out—especially if you’re dealing with “senioritis” or burnout near the finish line.
The truth is, selling your business is not something you want to do on autopilot.
Ask yourself:
Have I explored whether a family member could grow into the role?
Is now the right time, or would more preparation lead to a better outcome?
Do I know the full value of my business—and what I’d need after the sale to maintain my lifestyle?
Have I assembled a team that knows the right questions to ask and when to ask them?
Planning Doesn’t Mean Committing—It Means Controlling the Outcome
Just like financial planning, the sale of a business should be intentional. You don’t need to decide today—but you do need to start asking the right questions. Because when the time comes, you won’t have the luxury of starting from scratch.
As Benjamin Franklin famously said:
“By failing to prepare, you are preparing to fail.”
Information is your most powerful tool. Knowing the value of your business, understanding your family’s emotional readiness, and building a trusted advisory team now can make all the difference—whether you sell in one year, five years, or not at all.
Final Thought: You’re Not Just Selling a Business—You’re Shaping the Future
This isn’t just about transferring assets. It’s about passing on values, protecting relationships, and setting your family up for life beyond the business.
Whether you decide to sell now or wait a few more years, what matters most is being intentional—not reactive. The more clarity you have, the more control you keep.
Control over how your family will earn and live after the sale.
Control over how wealth will be passed on, protected, and preserved.
Control over your role moving forward—whether that means stepping back or staying involved.
When a sale is handled well, it’s not just an ending. It’s a chance to protect what you’ve built and empower the people you care about most.
You only sell your business once. The best outcomes come when you’ve taken the time to ask the right questions, assemble the right team, and act with clarity—not urgency.
And if you’re not sure where to begin, that’s okay. The first step is simply starting the conversation.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA
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