Quick Summary
When a business sale is approaching, most founders call their CPA first. That call is not wrong, your CPA is an important part of the team. But there is a common and expensive misunderstanding about what a CPA does versus what a tax attorney does, and conflating the two frequently means the strategy work never gets done at all.
What Your CPA Does In An Exit
Your CPA is your primary contact for historical compliance and tax reporting. In a business exit, they play several important roles.
They prepare and review the financial statements that buyers will scrutinize in due diligence. They advise on how transactions will be reported on your return after the sale closes. They calculate your estimated tax liability based on the deal as structured. They file the returns that reflect the completed transaction.
That work is essential. A CPA who knows your business is invaluable during a sale process. But their training and their license are built around accounting and tax compliance, the accurate reporting of what happened. They are not trained as legal strategists, and they cannot provide legal advice.
What A Tax Attorney Does That Your CPA Does Not
A tax attorney advises on the legal structure of transactions before they happen. That includes advising on deal structure, stock sale versus asset sale, and how each structure interacts with your tax exposure. It includes advising on QSBS qualification, holding period analysis, and what steps might address eligibility gaps before a sale closes.
A tax attorney drafts and reviews the legal documents that govern the deal: the purchase agreement, the asset allocation schedules, the representations and warranties. The tax treatment of a sale is frequently determined by language inside those documents, and the attorney who reviews them with tax strategy in mind will spot problems that a purely legal review misses.
A tax attorney can also structure trust vehicles, charitable strategies, and equity transfers in the pre-sale period in ways that reduce what gets taxed at close. Those strategies are legal work. A CPA can identify that you might benefit from a charitable remainder trust. A tax attorney prepares and executes it.
And in a dispute with the IRS, whether it arises from the sale or from a prior year’s return, a tax attorney can represent you in ways a CPA cannot. Attorney-client privilege covers communications with a tax attorney. It does not cover your CPA.
The Common Mistake In High-Stakes Exits
The expensive version of this confusion goes like this: a founder is six months from a liquidity event. They are talking to their CPA weekly. The CPA is doing the job a CPA does, reviewing financials, estimating tax, preparing to file. The founder assumes someone is handling the strategy.
No one is.
The deal closes. The tax bill is larger than expected. The founder calls their CPA and asks why nobody suggested a trust structure, a Section 1202 analysis, or a different deal structure. The CPA says, accurately, that structuring transactions is legal work, not accounting work. The founder realizes they needed a tax attorney and did not know it.
This is the most common version of the gap. It is also the most preventable.
How The Two Work Together
In a well-structured exit, the CPA and the tax attorney are communicating throughout the sale process. The CPA brings historical financial knowledge and compliance experience. The tax attorney brings deal structuring analysis and legal execution. Neither duplicates the other’s work.
The tax attorney frequently works from the CPA’s work product, using the company’s financial history to understand what structures make sense, what asset classes create ordinary income exposure, and what the company’s basis looks like across its asset types. The CPA uses the attorney’s deal structure guidance to prepare accurate projections and eventual tax filings.
Most CPAs who work with business-owner clients on exits welcome the collaboration. They know where their scope ends.
When To Bring In A Tax Attorney
Earlier than you think. The strategic work, entity structuring, trust formation, QSBS analysis, deal structure planning, has lead time. A tax attorney engaged 12-18 months before a potential sale has more tools available than one engaged the week before the LOI arrives. The exit planning conversation is worth starting before a buyer is in the room.
If you are closer to a transaction, six months or less, the window is shorter, but it is not empty. There are still decisions that get made in the pre-LOI period that a tax attorney can influence. The important thing is not to wait until the deal is signed to have the conversation.
Contact Dustin for a confidential conversation about your tax strategy.
