Case Study: Business Owners Exit with a Family Legacy

As you discuss income projections, portfolio sustainability, and how the family business’s corporate structure could evolve to allow Mark and Elaine to step back from day-to-day operations, a more complex issue surfaces.  What does succession look like — not just operationally, but reputationally and relationally? 

“Our two adult children are not active in the business,” says Mark. “A third-party sale is inevitable, and we are fine with that financially, but it’s a gut punch emotionally. The company’s name carries a lot of weight in the community,” he says. “For years, the business has been closely associated with the family’s identity and local impact. So what happens to that identity if we sell?”  

A business sale can be deeply personal and public at the same time.  You suggest that philanthropy — structured intentionally before a sale — can serve as a bridge.  Mark and Elaine can transfer shares in the business to a donor advised fund at The Community Foundation well in advance of any potential transaction. Then, when the business is sold, a portion of the proceeds lands in the donor advised fund. 

The tax advantages of the transaction are meaningful. By donating a portion of closely held stock before a legally binding sale process begins, Mark and Elaine are eligible for an income tax deduction, subject to AGI limitations, based on the stock’s fair market value at the time of the gift. Later, when the business is sold, the proceeds on the shares held by the donor-advised fund are not subject to capital gains tax. 

Creating a donor advised fund before the sale allows the family to articulate a charitable mission while the business is still operating. It signals continuity: although ownership may change, the family’s commitment to the community does not. 

As they consider what causes reflect the values that built the business and how they wish the family’s name to be represented post-sale, Mark and Elaine can create an intentional philanthropic structure. Elaine says, “This plan makes us feel like a future sale is less like an ending and more like a pivot.”  

Please reach out to our philanthropic advisors anytime. We can help you serve your charitable clients through all stages of their lives.