How to Sell Your Business to Family

When looking to sell your business, it’s possible you have potential buyers within your own family or would like to sell to family members for personal reasons.

If so, there are some special considerations as opposed to selling to a different potential buyer.

Some of these are beneficial, such as financing arrangements you’d be unlikely to consider with someone you don’t know that well. But there are also tax considerations, some of which are favorable and others that aren’t.

Here’s what to consider when deciding whether to sell your business to a family member.

IRS Scrutiny

First, the downside: conducting business transactions with family members may cause closer examination by the IRS.

They might question the price or valuation method you use, but as long as you can show you’re receiving the fair market value for the business, you should be on firm ground.

By anticipating the worst, you can avoid unpleasantness later. Utilize the services of professional financial and tax advisors before looking to sell your business to a family member. They can help you avoid the IRS contesting your valuation or bringing a gift tax assessment.

Special Financing Techniques Available

Now to the upside: when you sell your business to a family member, there are financing methods available to you and your buyer besides a lump-sum cash transaction.

These can be especially valuable when the family member buying your business doesn’t have the cash or access to enough cash to make the purchase.

Financing can be structured so that you receive a stream of income in exchange for your business while spreading out your gain on the sale over the payment period.

Here are some of the options:

  • Private Annuity – The payments for your business interest are spread out over the rest of your life and the payment amount is calculated using a life expectancy table.
    • If you pass away before reaching the calculated life expectancy, the buyer gets your business for less than the full price, and if you live longer, your buyer pays more than anticipated.
    • The major benefit to you is the removal of the value of the business (and the future appreciation) from your estate (i.e., less potential estate tax).
  • Installment Sale – This might be a suitable financing arrangement when you are willing to accept payments over time, want the additional security of a promissory note or collateral, and want to be sure you (or your estate) receive the full price for your business.
    • Unlike the private annuity, the buyer using installment payments must continue making payments to you or your estate until the full price is paid.
    • The major tax difference to you is that any balance still due at your passing must be included in the value of your estate for estate tax purposes.
    • If you meet all requirements, you can spread your gain on the sale over the installment period.
  • Self-Canceling Installment Note – This is a special form of installment note that is a hybrid of the private annuity and installment sale.
    • Like a private annuity, the payments end at your passing, and like an installment sale, the obligation can be secured with a note or collateral without jeopardizing the tax treatment.
  • Buy-Sell Agreement – These agreements let you arrange the terms of the sale today for a sale later. You can lay all the groundwork for the sale at a time when there is no pressure to sell.
    • Buy-sell agreements can be structured to provide potential buyers through the use of options or guaranteed buyers through purchase obligation clauses.
  • Coordinating the Sale with Gifts – It is possible to coordinate the sale of your business with a gifting program to reduce potential estate taxes.
    • Gifting allows you to systematically reduce the size of your estate.
    • When you make gifts of portions of your business interest, you can still maintain control of the business until you are ready to fully let go.
    • This strategy can provide you with the opportunity to ease your successor into the business by granting smaller ownership portions up until the time of sale.


There are plenty of reasons you might want to sell your business to a family member, and plenty more pros and cons to doing so. Given how complex it is, it can help to have someone knowledgeable to advise you on the best path forward.

As experienced financial professionals, we help clients like you figure out the best retirement plan for their situation, so that when they’re ready, they can retire gracefully with peace of mind.

Please connect with us and let us help you plan for your dream retirement. We would be delighted to go on the journey with you.

Confidence Wealth Management team





© 2024 Confidence Wealth Management LLC. All rights reserved.

Investment Advisory Services offered through Confidence Wealth Management LLC, an SEC registered investment adviser. Confidence Wealth Management LLC (CWM) and Confidence Wealth & Insurance Solutions LLC (CWIS) are two separate affiliated companies. All investment advisory services are provided by CWM. All insurance products and services are provided by CWIS. CWIS does not provide any investment advisory services. CWM does not sell any insurance products. For complete information regarding Confidence Wealth Management’s services and fees, please review our Form ADV Part 2A Disclosure Brochure, which can be found at or requested by calling us at (310) 824-1000. Information provided herein reflect Confidence Wealth Management’s views as of the creation date. Such views are subject to change without notice. Information provided herein is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any securities. No investment decision should be made based solely on any information provided herein. Confidence Wealth Management has not taken into account the investment objectives, financial situation or particular needs of any individual investor. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. This is designed to provide general information on the subjects covered. Pursuant to its circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that the information given does not give legal or tax advice. Should you have any tax or legal questions, you are encouraged to consult your tax advisor or attorney for any tax or legal matters. Not affiliated with the U.S. Government or any governmental agency.

Terms of Use  |  Privacy Policy

Confidence Wealth Management LLC (CWM) is an SEC registered investment adviser. Confidence Wealth & Insurance Solutions LLC (CWIS) is licensed under the NV Department of Insurance, license no. 3647322. CWM and CWIS are two separate affiliated companies. All investment advisory services are provided by CWM and all insurance products and services are provided by CWIS. CWIS does not provide any investment advisory services and CWM does not provide insurance services. CWM and CWIS have no affiliation with government, state, or local agencies. Consult with an attorney or CPA for usage of tax or legal concepts. This material may contain information that are close approximation to the totality of information available to us and not necessarily specific within regards to one situation or another. Some opinions and statements are informational. They are not investment advice as they may not be complete in terms of all details needed to affect an action you wish to undertake, investment strategy or plan. Pursuant to IRS Circular 230, the material is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. No estimates used are a promise of return. Also, many opinions are summaries and may not reflect all pertinent facts relevant to you. Any information given is to be considered general, and nothing said herein should be used as a basis for investment decision unless you consult with your Confidence Wealth advisor that can understand your unique situation and give you a customized solution with a complete disclosure. Past performance does not indicate future results. As you know, no one can predict the future. Thus, any forecast in this material is intended strictly as a possible future outlook and not a statement of fact as there could be any scenarios that are not in your favor when making a decision. You must examine all adverse and negative implications on any forecast when made. All information is based on the date of the material and may not be valid, may change, and/or may not be true any longer as time passes. Also, the Form ADV Part 2A for CWM contains detailed disclosures regarding our services and fees, along with applicable conflicts and how we address such conflicts. A copy of our Form ADV can be obtained by calling (310) 824-1000.

Taxes in Retirement guide


The Guide to Taxes and Your Retirement