Picture it: Two founders are golfing. One proudly tells the other about their recent business exit and big financial windfall—but laments the major tax hit. The second golfer asks: “Well, did you make a charitable donation before you sold the company?” And then they explain how they did donate private stock before their own company exit—and the subsequent tax benefits and philanthropic impact. The aggrieved first golfer gets quiet. Their next phone call? To their financial advisor: “Why didn’t you tell me about this option?”
Who would you rather be: the financial advisor or attorney who had already explained a tax-smart strategy for donating private stock to their client? Or the one whose client called them wondering why they missed an opportunity? It’s not uncommon for successful entrepreneurs to have significant portions of their wealth tied to these kinds of illiquid assets. Such assets—also called complex assets—can include private company stock, restricted stock, real estate, and more. These can be challenging to transfer or donate to charity, and when sold, they can induce significant taxes. But consider the opportunity presented by changes in the broader market. The number of public companies have declined by almost half over the past two decades. And, when looking at companies with revenues greater than $100 million, there are now only 2,800 public firms vs. 18,000 private firms. Regardless of their size, with a greater prevalence of private companies, there’s a growing need for founders to understand how they can give smarter when it comes to assets connected to their private businesses.
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