Selling a Business in Utah: Financial Decisions to Make Before Signing an LOI

TL;DR

Before signing an LOI, determine your required after-tax cash, verify ownership and basis, review transfer plans, and assign each adviser’s work.

Why should your personal plan come before the LOI?

Your personal plan should come first because a strong headline price can still leave you short of dependable cash.

A letter of intent (LOI) records the main terms a buyer and seller plan to pursue. By that stage, price, payment timing, and deal structure may already be taking shape.

The goal is not to predict the final tax bill or draft the transaction. It is to know what the sale must provide, which records and questions remain open, and which professional owns each decision.

Private Advisory provides liquidity planning from offices in Lehi, Utah, and Redmond, Washington. We help business owners connect personal cash needs and a proceeds plan with the transaction timeline. Independent CPAs and attorneys provide tax and legal advice under separate engagements.

What should you decide before signing an LOI?

Decide how much dependable, after-tax cash you need and which proposed deal terms could keep that cash out of reach.

Start with your life, not the buyer’s headline price. Estimate the cash needed for:

• Annual household spending
• Federal and Utah taxes to be modeled
• Debt you plan to repay
• Large purchases or family commitments
• A reserve for several years of spending
• Charitable or family gifts under consideration
• Investments or businesses you expect to fund
• Costs that continue after the sale, such as insurance or property expenses

Then separate dependable proceeds from contingent proceeds. Cash at closing is different from an earnout tied to future performance. Money in escrow is not available until it is released. Rollover equity is an ownership interest in the buyer or combined company, not cash. A buyer’s note depends on later payments and the buyer’s ability to pay.

The sale price does not fund your life. Available after-tax proceeds do.

Private Advisory’s role is to turn personal spending, reserves, debts, and future commitments into a proceeds target. The seller’s CPA then models taxes. Transaction counsel reviews the LOI and sale documents. Those three views should use the same deal assumptions.

Which records should you assemble before the buyer sets the terms?

Complete ownership, basis, and asset records give your advisers the inputs needed to test a proposed structure.

Gather these documents before the LOI:

The IRS explains that an asset sale generally treats the business as a collection of assets. Each asset must be classified, and gain or loss is determined separately. Inventory, depreciable equipment, real estate, and goodwill may not receive the same treatment.

For an S corporation owner, the recordkeeping burden is personal. The IRS says the shareholder must establish stock basis when stock is sold or disposed of so the proper gain or loss can be determined. A Schedule K-1 does not replace a complete basis history.

Missing basis is not merely a tax-return problem. It makes the pre-LOI proceeds estimate less reliable.

What tax questions should a Utah seller ask before accepting the structure?

Ask the CPA to model each realistic structure using the actual entity, assets, basis, liabilities, payment dates, and seller residency.

A useful tax request is specific:

1. Is the buyer proposing a stock, membership-interest, or asset purchase?
2. Which assets or ownership interests would the seller transfer?
3. How would the purchase price be allocated?
4. What is the adjusted basis of each relevant asset or ownership interest?
5. Could prior depreciation cause part of the gain to be treated as ordinary income?
6. How would assumed debt affect the amount realized—the value treated as received in the sale?
7. Which payments arrive at closing, and which arrive later?
8. Which federal and Utah returns would report the transaction?
9. How do Utah sourcing rules (which income Utah treats as connected to the state) and residency rules apply to this seller and this deal?
10. What estimated payments and filing dates should be planned?

Do not assume every dollar above basis is taxed as long-term capital gain. IRS Publication 544 explains that the treatment of business property varies, while IRS Publication 537 says depreciation recapture may be treated as ordinary income.

An installment sale means at least one payment arrives after the tax year of sale. Each payment generally includes interest, a return of adjusted basis, and gain. Publication 537 also states that regular inventory sales do not qualify for installment reporting. A buyer’s note may spread cash receipts, but the CPA must test the tax treatment and the financial adviser must test whether the payment schedule meets the seller’s needs.

Current Utah analysis must match the seller, entity, transaction, and tax year. Do not apply a rate or credit taken from an estate, trust, or other taxpayer’s form to an individual business owner without confirming that it governs the sale.

Should you complete gifts before signing the LOI?

Have estate and tax counsel review any proposed family or charitable transfer before signing an LOI.

A proposed gift of business equity raises at least four separate questions:

• Does the governing document permit the transfer?
• When is the gift legally complete?
• What is the interest worth on the transfer date?
• Who will report the gift and any later sale income?

An LOI is not a universal legal or tax deadline. The answers change with the facts. Negotiations, buyer interest, transfer restrictions, and retained rights may all matter. Estate and tax counsel should review the actual transaction timeline before anyone transfers an interest.

For a charitable gift, fair market value means the price agreed upon by a willing buyer and seller who know the relevant facts and are not forced to act. IRS Publication 561 says valuation should consider all relevant factors, including recent transactions and supported appraisals. A pending sale may therefore affect the valuation evidence.

Family transfers can carry additional rules. The 2025 Instructions for Form 709 identify special provisions for certain transfers of interests in corporations, partnerships, and trusts. Proposed family gifts require review of the ownership terms, retained interests, valuation, and reporting.

Private Advisory can model how a proposed gift affects the owner’s personal cash needs and proceeds plan. Independent estate attorneys and CPAs determine the legal form, timing, valuation requirements, and tax reporting.

How should you test the LOI against your personal proceeds plan?

Compare cash available at closing with your near-term needs before counting an escrow, earnout, note, or rollover interest.

Consider this hypothetical example. An owner estimates these personal requirements:

The proposed deal includes $1.4 million of cash at closing, $300,000 in escrow, a $600,000 buyer note, and a possible $500,000 earnout. The owner’s CPA estimates that $550,000 of the closing cash should be reserved for taxes and transaction costs.

That leaves $850,000 of available closing cash:

$1,400,000 − $550,000 = $850,000

The owner has a $150,000 near-term gap:

$1,000,000 − $850,000 = $150,000

The proposed total consideration may look sufficient, but the dependable closing cash does not cover the stated requirements. The seller can now ask transaction counsel and the CPA to examine payment timing, escrow terms, debt repayment, and other structure choices before the commercial terms harden.

The example does not show that one structure is better. It shows why price and liquidity are different measurements.

Who should handle each decision before the LOI?

Clear ownership of each task prevents a tax assumption from being mistaken for legal advice or a deal term from being mistaken for available wealth.

Private Advisory coordinates liquidity planning around shared assumptions and timelines. Private Advisory is neither an attorney nor an accountant. Its adviser can serve as the point of contact among independently engaged professionals, but each professional remains responsible for work within that professional’s field.

What should happen to the company’s retirement plan?

If the company sponsors a 401(k) or another employer plan, assign responsibility for its treatment before closing.

The deal may affect the plan sponsor, participating employees, payroll, service providers, and plan documents. Do not assume the plan or its duties move to the buyer automatically.

The U.S. Department of Labor distinguishes business decisions, such as amending or terminating a plan, from the steps used to carry them out. Implementation may involve fiduciary duties to plan participants.

Ask transaction counsel, ERISA counsel, and the plan’s service providers:

• Will the seller’s entity continue after closing?
• Does the buyer expect the plan to continue, merge, or terminate?
• Who will make required contributions and deposits?
• Who will send participant notices?
• Who will handle testing, filings, distributions, and record retention?
• Which decisions must be made before signing or closing?

A line assigning each task to a named party is more useful than a general promise that the plan will be handled later.

What should your pre-LOI timeline include?

Work through four steps to move from personal requirements to documented deal questions. Agree on deadlines with the professionals responsible for each step.

Set the proceeds floor

Set the personal proceeds floor. List annual spending, reserves, debt, family commitments, and planned gifts. Start gathering ownership, basis, asset, and retirement-plan records.

Model likely structures

Ask the CPA to model the likely structures and payment schedules. Have transaction counsel review governing documents and transfer limits. Bring proposed family or charitable transfers to estate counsel.

Test expected payments

Compare each expected payment with the personal proceeds plan. Separate cash at closing from escrow, notes, earnouts, and rollover equity. Assign responsibility for any employer retirement plan.

Confirm assumptions before signing

Resolve material gaps or record them as conditions requiring further work. Confirm that the CPA, attorneys, and financial adviser are using the same price, allocation, payment dates, and ownership assumptions.

The sequence depends on the transaction. Ask each professional which decisions must precede the LOI and which require more information.

What questions should you answer at the final pre-LOI meeting?

The meeting should end with a written list of numbers, assumptions, owners, and deadlines.

Ask:

• What cash is expected at closing?
• What amount is held back, contingent, or paid later?
• What tax and transaction-cost reserve is being modeled?
• Does available closing cash meet the personal proceeds floor?
• Which ownership and basis records remain incomplete?
• What deal structure is the CPA modeling?
• Which current federal and Utah authorities govern that model?
• Are any gifts still under consideration?
• Does the company sponsor a retirement plan?
• Who is responsible for every unresolved legal, tax, plan, and personal task?
• Which LOI terms must remain open until the analysis is complete?

A coordinated plan does not remove deal risk. It makes the risk visible before the seller accepts terms that may be hard to change.

FAQ

Who should review a business-sale LOI before I sign it?

Send the complete draft and any revised terms to your transaction attorney, CPA or tax attorney, and personal financial adviser. Ask each to identify unresolved decisions within their engagement and the assumptions they used. Private Advisory can assess how the proposed payments fit household cash needs; transaction counsel reviews the agreement and independently engaged tax professionals assess tax treatment.

What should I do if my business ownership or tax-basis records are incomplete?

Give your CPA and transaction attorney an explicit missing-record list before relying on a proceeds estimate. Ask which records must be reconstructed, who will obtain them, and how uncertainty affects the analysis. Private Advisory can flag the resulting uncertainty in your personal proceeds plan while your CPA establishes the tax-basis figures.

Who should I consult if I am moving out of Utah before selling my business?

Consult a tax professional familiar with Utah and your destination state before assuming a move changes the sale's tax treatment. Provide the planned move date, transaction timeline, ownership records, and business locations so that professional can evaluate residency and income sourcing. Private Advisory can incorporate the resulting tax assumptions and relocation costs into your cash-flow plan; it does not determine your tax residency.

Do I need a personal financial adviser if an investment banker is selling my company?

Compare the scope of the banker's engagement with the personal decisions you still need help making. A transaction engagement may leave household spending, reserves, and investing the proceeds to a separate adviser. Private Advisory provides personal financial and liquidity planning and coordinates with independently engaged tax and legal professionals. Confirm who owns each task so work is neither duplicated nor left unassigned.

What is the practical next step?

A useful next step is a one-page proceeds worksheet and a shared document list, not a forecast built from the buyer’s headline price.

Write down your required closing cash, list each form of proposed consideration, and mark every unresolved item with the responsible professional. Then bring the same page to your financial adviser, CPA, and attorneys.

Business owners who want help connecting those decisions can contact Private Advisory to discuss liquidity planning with its Lehi team.

This is not tax or legal advice. Consult your own tax and legal professionals.

About Private Advisory

Private Advisory is a wealth management firm serving founders, business owners, executives and families across the western United States. The team combines financial planning and investment management to help clients navigate business sales, equity compensation, retirement and the transfer of wealth across generations. Its work connects investment decisions with cash-flow needs and family priorities, while coordinating with clients’ independent tax and legal professionals. Private Advisory also offers family office services for eligible clients and workplace retirement consulting for employers.