Retiring from or selling a business can be an exciting time of reflection for business owners — many of whom say they’re looking forward to their next chapter. It’s a time when many anticipate how they will give back, increase community involvement alone or with family, and imagine how their skills can be used to solve any number of problems.
Of course, planning for a business exit can be all-consuming, leaving little time to think about what’s next. Refining one’s purpose and evaluating the methods to execute on them can be a time-intensive and dynamic process itself, and it’s best to consider them well in advance of exiting the business.
For those planning to engage in a purpose-driven life beyond business, which often includes philanthropy, there are some important considerations to keep in mind:
Understand Personal Motivations and Options
The motivation to engage in philanthropy will be unique to everyone. Whether the plan is to be deeply involved in philanthropy, partner with innovative entrepreneurs to solve problems, engage family in the process, or some combination of all three, the path required to achieve that plan will require expert partners and a sense of adventure.
For those who include philanthropy in their life after the sale or succession of a business, creating a charitable organization can be rewarding on many levels. It’s important to understand how different charitable organizations function, what they can and cannot do, and the tax consequences of each. Some examples of charitable organizations include:
- Private foundations
- Donor advised funds
- Charitable trusts
Increasingly, more individuals are using non-charitable tax efficient organizations, such as a 501(c)(4), and for-profit LLCs or general partnerships, to collaborate with philanthropic plans. This approach supports a broader funding spectrum that acknowledges how effective business models solve problems, regardless of tax identification.
Given the complexity, it is critically important to engage specialized advisors early in the planning process to help navigate the different vehicles and methods that are appropriate to reach the desired goals. Often, stacking two to four different vehicles across the funding spectrum can be the most effective way of reaching those goals.
Engage the Right People
Exiting a business is a complex endeavor with various financial and interpersonal considerations. It’s important to engage a team that can help evaluate the family’s goals and tax strategies. That may mean engaging experts in the areas of tax, accounting, law and business valuation, among others.
Additionally, having a specialized advisor in philanthropy, purpose-aligned investing and family systems eases the process immeasurably. Engagement with family early in the process helps manage expectations and fosters a shared sense of purpose that can strengthen bonds across generations.
The Impact of Structure and Timing
Most often, a family’s wealth is tied to the business itself. Using those assets to fund philanthropic goals depends heavily on how the business is organized. Whether structured as a C corporation, S corporation, LLC or another entity, each form carries distinct tax implications that affect both personal outcomes and charitable goals.
Timing is an equally important consideration. Gifting assets can unintentionally lead to additional taxation if they aren’t appropriately timed. For instance, donating privately held shares to a charitable entity too close to the company’s sale could lead to self-dealing and/or loss of the tax advantages when donating. Understanding the appropriate business structure and when to time gifts underscores the importance of engaging the right team.
There’s Still Time to Plan for 2025
While including purpose and philanthropy in a business exit plan should be a long-term endeavor, there are still more immediate action items to pursue. The One Big Beautiful Bill Act became law on July 4, 2025. In 2026, charitable contributions will have both a floor and a cap. They will only be deductible to the extent that charitable gifts exceed 0.5% of the contribution base and are limited to 35% of the donor’s adjusted gross income (AGI). Individuals can still take advantage of a full deduction available for gifts to charity before Dec. 31 and should specifically consider:
- Accelerating gifts that would have been made in future years into this year. Bunching increases itemized deductions and avoids the 0.5% floor that begins in 2026.
- Gifting stocks or other non-cash assets now to avoid the new 0.5% floor in 2026 and potentially realize capital gains benefits now.
- Using a donor-advised fund to secure a 2025 deduction while deferring a final decision on the charitable recipient.
- Establishing a charitable remainder trust to diversify assets, retain income streams and claim deductions before next year’s changes.
- Staying aware of the contribution base and carry-forward limitations. Beginning in 2026, carry-forwards may be subject to the floor.
Timing and Tax Basis are Important
When itemizing deductions, it’s important to weigh the benefits of donating appreciated assets versus gifting cash. Cash gifts to public charities, including donor-advised funds, may be deductible up to 60% of the contribution base, while gifts of appreciated assets have lower deduction limits – but can eliminate future capital gains taxes — making careful analysis essential.
Even for those who don’t itemize, they can still achieve tax advantages through Qualified Charitable Distributions (QCDs). Those who are older than 70 1/2 may donate up to $108,000 from their IRA directly to charity in 2025, reducing taxable income and required minimum distributions, which can lower adjusted gross income and help avoid higher Medicare premiums or loss of senior deductions. Additionally, a one-time election up to $54,000 of a QCD to fund a charitable gift annuity or charitable trust can be made, providing lifetime payments, with the remainder going to charity when the owner and beneficiary die.
Pairing a Roth IRA conversion with charitable giving can also be highly efficient in 2025, as conversions generate taxable income and charitable deductions this year are more valuable than they will be in 2026.
Ultimately, a fulfilling life after an exit or succession is often the result of careful execution at the intersection of business and personal life. The bottom line is there are multiple ways for business owners to leave a legacy that aligns with their values and purpose. But, with significant changes to charitable giving rules on the horizon, acting quickly is critical. With the right planning, strategy and team in place, business owners can implement a philanthropic strategy that both achieves their purpose-driven goals and optimizes financial outcomes.