Client Background
The founder of a highly successful professional services firm built over several decades. Through sustained growth and operational scale, the company reached an internal valuation of approximately $78,000,000.
As the client began considering a potential liquidity event, the company remained personally owned, meaning any transaction would immediately trigger a significant capital gains tax liability.
Strategic Objective
- Preserve enterprise value at the point of sale
- Prevent immediate capital gains recognition upon exit
- Implement structural ownership planning prior to liquidity
- Establish long-term capital continuity following the transaction
Prior Structure
The company was held under an improperly structured trust, as we see very often. Not all trusts are equal.
While the business had grown substantially in value, no structural planning had been implemented ahead of the anticipated sale. Under this arrangement, the transaction would result in immediate capital gains recognition on the realized appreciation.
Structural Limitations
As valuation approached $78,000,000, the projected tax exposure became materially significant.
- Estimated business value: ~$78,000,000
- Projected capital gains exposure: ~$24,000,000
Without structural repositioning, a liquidity event would convert a meaningful portion of the business value into a large immediate tax obligation.
Engagement
Structural Implementation
We designed and implemented a private trust-based ownership framework prior to the transaction.
This included:
- Establishment of a private trust ownership structure
- Repositioning the business interest within the fiduciary framework
- Executing the sale within the trust architecture
- Addressing capital gains treatment at the ownership level
By restructuring ownership before the transaction, the tax exposure associated with the sale was addressed within the structural framework rather than at the moment of liquidity.
Outcome
- Business value sold: ~$78,000,000
- Projected capital gains exposure: ~$24,000,000
- Capital gains paid at sale: $0
- Capital preserved for long-term planning and multigenerational continuity