Frequently Asked Questions
Here are answers to the questions we’re asked most often about how Covello Tax Law works.
Exit Planning and Business Sale Questions
Here are answers to common questions business owners ask when they begin thinking about exit planning, tax exposure, and the structure of a future sale.
What is exit planning, and when should I start?
Exit planning is the process of preparing for a future sale or transfer of your business in a way that improves after-tax outcomes. It often includes reviewing entity structure, evaluating whether stock sale or asset sale treatment is more favorable, identifying planning opportunities such as installment reporting or charitable strategies, and coordinating with your CPA and other advisors. In most cases, the right time to start is before a buyer is on the horizon. Many of the most effective strategies require time to implement properly.
How can I reduce taxes when I sell my business?
There is no one-size-fits-all strategy. The right approach depends on the structure of the business, the type of sale, the timing, the state tax exposure, and the owner’s broader financial picture. Common planning tools can include entity restructuring, stock sale versus asset sale analysis, installment sale treatment, charitable planning, and qualified small business stock analysis where applicable. The key is to evaluate these options before the transaction is too far along, because many planning opportunities narrow or disappear once a deal is already in motion.
What is an installment sale, and when does it help?
An installment sale is a structure in which part of the purchase price is paid over time instead of all at closing. In the right circumstances, that can spread gain recognition across multiple tax years rather than forcing the entire tax impact into one year. It can be useful for sellers who do not need all proceeds immediately and are working with a creditworthy buyer. It is not a universal solution, though. The buyer’s ability to make future payments, the tax rate environment, and the nature of the assets being sold all need to be evaluated carefully.
What is qualified small business stock, and who qualifies for it?
Qualified small business stock, often called QSBS, refers to stock that meets the requirements of Section 1202 of the Internal Revenue Code. When those rules are satisfied, a shareholder may be able to exclude a significant portion of gain on sale. Qualification depends on several factors, including whether the stock was acquired at original issuance, whether the company is a qualifying C corporation, whether the business fits within the eligible trade or business rules, and whether the required holding period has been met. Because these requirements are technical and state tax treatment does not always follow the federal rule, the analysis should happen well before a sale is contemplated.
If my CPA handles my taxes, do I still need a tax attorney for exit planning?
In many cases, yes. A CPA and a tax attorney often play different roles. Your CPA is typically focused on compliance and reporting what has already happened. A tax attorney focused on exit planning helps structure what happens before the deal is finalized, including transaction design, legal implementation, coordination of planning strategies, and analysis of how those strategies will stand up under IRS scrutiny. The strongest results often come when the tax attorney and CPA work together rather than treating the sale as a compliance issue alone.
Tax Planning Program
What is the Tax Planning Program?
The Tax Planning Program is an ongoing planning relationship offered to a select group of clients. Rather than providing advice only when a transaction arises, the program applies continuous tax planning across a client’s businesses, investments, and personal structures. The objective is straightforward: identify and implement opportunities to reduce tax liability before those opportunities are lost.
Why does the Tax Planning Program exist?
In practice, many meaningful tax planning opportunities arise between transactions, between tax years, and between the moments when advisors are typically involved in a client’s affairs. The Tax Planning Program exists to address that gap by applying ongoing tax judgment to a client’s full financial picture.
What does participation in the Tax Planning Program include?
Members receive ongoing tax planning informed by a detailed understanding of their businesses, investments, income streams, and personal circumstances. The program includes regular planning meetings, development of bespoke planning ideas, coordination with other advisors when needed, and implementation of straightforward legal documents or tax forms required to execute planning strategies.
How does the program work with my existing advisors?
The Tax Planning Program is designed to complement a client’s existing advisory team. Covello Tax Law works alongside CPAs, financial advisors, and other professionals to ensure planning ideas are coordinated, implemented properly, and reflected consistently in reporting and documentation.
Who is the Tax Planning Program designed for?
The program is most effective for entrepreneurs and investors with meaningful complexity in their financial lives. Clients typically have multiple business and investment activities and situations where structure, timing, and tax classification decisions can materially affect outcomes.
Strategic Tax Planning vs. Compliance
How is strategic tax planning different from tax compliance?
Tax compliance focuses on accurately reporting what has already occurred. Strategic tax planning focuses on shaping outcomes before they are fixed. At Covello Tax Law, planning is proactive, not reactive. We evaluate structure, timing, and transaction design in advance so that major liquidity events and complex business decisions produce intentional, defensible results rather than default tax consequences.
Do you prepare tax returns?
No. Covello Tax Law does not prepare income tax returns. We work alongside your CPA or tax preparer, who remains responsible for reporting and filings. Our role is to design and evaluate planning strategies in advance of transactions and structural decisions. This separation allows for clearer analysis, coordinated implementation, and stronger overall outcomes.
If my CPA handles my taxes, why would I need a tax attorney?
CPAs play an essential role in compliance, reporting, and ongoing advisory support. Strategic tax planning for liquidity events, entity restructuring, trusts, and complex transactions often involves legal interpretation, structural design, and evaluation of risk under the tax code. We collaborate closely with CPAs and financial advisors to ensure that planning decisions are aligned, clearly documented, and built to withstand scrutiny.
Is strategic tax planning only relevant during a sale?
Liquidity events create significant planning opportunities, but strategic tax planning is not limited to the eve of closing. Structural decisions made during growth, expansion, investment activity, and succession planning can materially affect future outcomes. Early planning provides more flexibility, but thoughtful review can still add value even when a transaction is near.
How do you ensure that a tax strategy is defensible?
Every strategy is evaluated against statutory authority, relevant guidance, and the economic realities of the transaction. Our approach emphasizes clarity, documentation, and alignment with how the business actually operates. The goal is not complexity for its own sake. The goal is a structure that delivers measurable value and stands up under scrutiny.
Exit Planning Timing and Opportunities
Is it too late to start tax planning if I am already negotiating with a buyer?
No. Many planning opportunities remain available even when negotiations are underway. Some strategies can be implemented in weeks or months and still have a meaningful impact on the seller’s outcome. While certain long-term techniques may no longer be available, reviewing structure, timing, and equity treatment during negotiations can still protect value.
What planning opportunities still exist once a letter of intent is signed?
After an LOI, sellers can often evaluate entity structure, equity positions, payment timing, and potential ordinary income exposures. Adjustments to these areas may still reduce tax exposure when coordinated with the advisory team. The key is understanding the constraints of the LOI and identifying options that align with the seller’s goals.
How early should I involve a tax attorney if I am considering selling my business?
The earlier the planning begins, the more options are available. That said, many sellers initiate planning when the sale feels more certain, such as when buyer interest increases or an offer appears. The most important step is reaching out as soon as you anticipate a potential sale so that strategy and timing can move forward together.
Can tax planning still help if the sale has already closed?
Yes. Planning options are more limited once the transaction is complete, but sellers may still benefit from strategies related to the deployment of proceeds, timing of recognition, and longer-term tax and estate planning. The goal in these situations is to identify opportunities that support the seller’s broader financial strategy.
What information should I have ready before speaking with a tax attorney about a potential sale?
It is helpful to have a general understanding of your company’s structure, cap table, financial performance, and any communications with potential buyers. If an LOI exists, sharing its terms provides immediate clarity. The initial conversation does not require extensive documentation; the purpose is to identify priorities and opportunities for planning.
Working With Covello Tax Law
How do you work with clients?
Every engagement begins with a conversation. We start by understanding your goals, structure, business, family, and existing advisor relationships. From there, we design a strategy that aligns with your business and financial objectives. You’ll work directly with Dustin throughout the process.
Do you work with clients outside of my state?
Yes. As a specialist in federal tax planning, Covello Tax Law serves clients and advisors nationwide through a secure, digital-first platform. This allows us to collaborate efficiently and deliver the same level of service wherever you are located.
Do you only work with entrepreneurs preparing to sell a business?
No. While exit planning is a major focus, we also help business owners, investors, and advisors with tax optimization, ongoing business and legal guidance, and entrepreneur-focused estate planning.
Do you work with every client who reaches out?
No. Covello Tax Law is focused on complex tax planning where structure, timing, and strategy materially affect outcomes. If a matter does not require sophisticated planning or does not align with the firm’s areas of focus, we will say so and, when appropriate, help point you to a better resource. This ensures that clients who engage the firm receive meaningful value and direct attention.
Is it ever too late to do tax planning around a sale or liquidity event?
Earlier planning almost always creates more options, but it is rarely pointless to ask. While some strategies require advance preparation, others can be implemented weeks or even days before closing, depending on the facts. In some cases, planning after a transaction has occurred can still improve outcomes through post-sale structuring. The right time to explore planning is as soon as the question arises.
Collaboration With Advisors
How do you coordinate with financial advisors and CPAs?
We collaborate directly with your advisory team to ensure tax, legal, and financial strategies align. Our role complements, never replaces, the relationships that you already trust. By working closely with your other advisors, we ensure that your plan is implemented and understood and therefore withstands scrutiny.
Can other professionals refer clients to you?
Yes. We regularly partner with financial advisors, accountants, and other attorneys on complex planning matters. Every referral is handled with discretion and transparency, and the referring advisor maintains the primary client relationship.
Do you offer educational sessions or advisor briefings?
Yes. We offer collaborative planning sessions and strategy briefings for advisors and their clients. These can be customized for topics such as entity structuring, transaction planning, or succession strategy.
What is the Partnership Referral Program?
We value the trust that advisors show us when they allow us to help their clients. As such, as permitted by legal and ethical standards, we pay referral fees and seek to provide value to our trusted referral sources. Please ask about our Partnership Referral Program.
Will working with Covello Tax Law change my relationship with my CPA or financial advisor?
No. The firm’s role is to complement existing advisors, not replace them. We coordinate closely with CPAs, financial advisors, and other attorneys so that tax, legal, and financial strategies align. Clients retain their trusted relationships, while gaining access to advanced planning that fits seamlessly into the broader advisory team.
Engagement and Fees
How do you charge for services?
We tailor our fee structure to the scope of work. Most projects are handled on a fixed or project-based fee, outlined in advance. For ongoing planning relationships, we offer advisory arrangements on a subscription, flat-fee basis that are designed for continuity, certainty, and responsiveness.
How do we ensure alignment?
Whenever possible, we defer a portion of our fees to coincide with a client’s milestone, whether a capital raise, sale, or other liquidity event, or the delivery of our work product. We want to align our interests with our clients, not nickel-and-dime them before our clients realize value.
Practice Focus
What areas of law do you handle?
Covello Tax Law focuses exclusively on:
- Exit Planning
- Tax Optimization
- Practical Business and Legal Advice
- Entrepreneur-Focused Estate Planning
This focus allows us to provide depth and precision across every area of planning.
What types of situations typically benefit most from working with your firm?
Clients tend to see the greatest value when there is a meaningful liquidity event, complex equity structure, multi-entity business, or significant investment activity involved. Matters where structure, timing, or transaction design can materially affect taxes are particularly well suited for advanced planning. Routine compliance or filing work is generally not the firm’s focus.
Getting Started
What’s the best way to begin?
Reach out through our contact form or email Dustin directly. We’ll schedule a short introductory call to learn more about your goals and determine how we can best support them.
What can I expect after the first conversation?
You’ll receive a clear outline of next steps, including timelines, deliverables, and engagement structure. Our process is transparent, efficient, and focused on clarity from start to finish.
How do you handle confidentiality, especially for sensitive transactions?
Discretion is fundamental to how the firm operates. All inquiries and engagements are handled confidentially, and planning is conducted with care to protect sensitive financial, business, and personal information. We regularly work on matters that require privacy, including pre-announcement transactions and closely held business sales, and structure communication accordingly.
Let’s Talk About Your Next Move
Whether you are planning a company sale, reviewing your overall tax minimization strategy, or advising a client, the first step is a confidential conversation.
Covello Tax Law works directly with entrepreneurs, investors, advisors, and business owners nationwide to create strategies that optimize what they have built.
Email us or use this secure form, and we’ll be in touch.
Please do not include sensitive financial or tax details in your message. All inquiries are kept confidential.
