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7 Steps to Take Once You've Sold Your Business

Oct 21, 2019 4 min read Teri Cettina

Key Takeaways

  • Selling your business can open up many new financial options.
  • Your financial goals and risk tolerance may be different now that you're no longer a business owner.
  • It's a good idea to consult financial and legal professionals before you start spending or investing your sale proceeds.



You've finally hit the milestone many business owners anticipate for years: You've sold your business. This event may leave you with the largest financial windfall of your life. So what should you do with the money you've earned?

How you handle this influx of cash is important. After all, you may need to use the money to cover your living expenses for years to come or to fund your retirement.

Here are the key steps to take to help you figure out what to do after selling your business.


1. Take your time

You don't have to decide how to deploy your money right away. It's reasonable to park your proceeds in a simple savings account or in certificates of deposit (CDs) for a few months, or even up to a year. Doing so can buy you some time to work out your long-term investing and saving strategies.

If you haven't already done so, this is a good time to assemble a professional team that can help you make smart financial decisions. Helpful team members may include an attorney, an accountant or a tax professional and a financial planner with expertise in wealth, retirement and estate planning.


2. Tackle your tax plan

Depending on the legal structure of your business and how you sold it — whether with cash upfront, payments over time, stock options or some other method — you may have to pay a fairly significant business tax bill Opens in new window. Your financial team can help you explore ways to invest your money in retirement or other types of accounts to minimize your tax burden. They can also help you decide how to best structure your tax payments.


3. Review your personal spending plan

It's important to determine how much you need to withdraw each year from your business proceeds now that you're no longer taking salary draws. Be sure to include any expenses that you previously ran through your business, from cell phone plans to insurance premiums.

Once you've identified your spending needs, financial and tax planners can help pinpoint how much of your business proceeds you'll need to maintain your lifestyle. You may want to invest the rest of your proceeds for a longer-term goal, such as retirement.


4. Revisit your major financial goals

Are you interested in starting another business? Are you planning to retire? Or are you hoping to fund certain financial goals for your family, such as college costs? All these priorities will affect how you invest your business proceeds.


5. Update your wealth and estate plans

You may need to update the financial plans you created while you were still a business owner. In particular, the 2017 Tax Cuts and Jobs Act Opens in new window may impact your approach to gift and estate taxes. Also, if you're nearing retirement, your tax and financial advisors can help you update your strategy to reflect your new goals and your current financial risk tolerance.


6. Invest cautiously.

This may be the one time in your life you have access to this much money all at once, so be sure you fully understand any investments your advisors suggest. And if you're relying on this money for retirement, it's especially important to invest your money wisely. You'll likely want to retain your principal — the money you initially invested — as long as possible, while also generating ongoing income.


7. Beware "shiny object syndrome"

For many business owners, the sale of their business marks the first time in their life they've had a significant amount of wealth. It's easy to be tempted to spend this money on luxuries such as a new car, a second home or extravagant trips.

However, you're better off waiting to make big purchases until you've worked out your ideal spending and retirement investing plan with your financial advisor.

Even though you've sold your business, the bottom line is that you're the boss of how you use the sale proceeds. The choices you make now can help you create financial security now and for years to come.


What you can do next

Now that you've sold your business, spend time thinking about your key financial goals — particularly your retirement plan. Once you have a list of priorities, meet with a financial professional to discuss which investing, saving and spending options make the most sense for you.

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