Exit Planning in an Election Year: What Businesses Need to Know

As the onslaught of political ads, debates, and cable commentary begins, we are reminded daily – it's an election year. It's more important than ever for businesses to prioritize exit planning strategies during an election year.

Navigating the intricacies of a business transition during an election year requires a proactive and strategic mindset. During my decades of experience, I’ve guided entrepreneurs through election year transitions, and my most straightforward piece of advice: knowledge is power. Business owners must actively engage in strategic planning, closely monitor legislative changes, and adapt their financial strategies accordingly. It's the key to ensuring a robust and successful exit strategy amidst the uncertainties of an election year.

Legislative Uncertainties

Uncertainty for business owners during an election year is inevitable. The potential impact of new administrations and legislative changes, particularly concerning capital gains taxes, prompts businesses to consider accelerating their exit plans before year-end. And while tax planning is a critical part of any exit strategy, when we approach an election its importance cannot be overstated. A carefully crafted tax plan can help mitigate the risks posed by potential tax law changes and ensure preparedness for any legislative shifts, regardless of the election’s outcome. So, what potential legislative changes could impact their plans?

The qualified small business stock election, enabling an initial $10 million of C corporation stock tax-free, is at a crossroads and susceptible to revisions depending on what party takes power in the House, Senate, and White House. Similarly, tax laws governing charitable trusts, facilitating tax-free status for allocated funds through new stock issuance, face potential shifts. The impending reduction in the estate tax threshold by over half in 2026 adds another layer of significance to these considerations. The broader spectrum of tax policies, with uncertainties surrounding potential increases or reductions by Democrats and Republicans, further underscores the complexity for business owners engaged in exit planning. Vigilant monitoring and adaptability to possible legislative changes are paramount for navigating this intricate landscape.

Mitigating Challenges

We can’t predict the future, but we can prepare for it. To that end, it is vital to be proactive when it comes to exit planning and navigating the challenges posed by an election year. I urge business owners to always be ready to exit and build the company with an eventual transition in mind.

I first always encourage business owners to get involved in the election process, with an eye toward the future that may or may not see their desired party in power. After election day, the focus shifts to understanding the post-election landscape and staying informed about proposed initiatives, such as the Wyden tax plan. I advise business owners to strategize not only for exiting but also for adapting their business operations based on the evolving legislative landscape.

Exit planning in an election year demands a strategic and adaptable approach. The uncertainties surrounding legislative changes and tax reforms necessitate careful consideration and proactive measures. If you are a business owner navigating this complex terrain, reach out. We are here to have those conversations and help you stay informed, plan ahead, and be prepared for any shifts in power to ensure a successful exit strategy.