Best exit strategies to roll equity into next deal and prevent tax bomb

December 12, 2025

by a searcher from Rice University - Jesse H. Jones Graduate School of Business in Houston, TX, USA

Hi there - partner & I are looking into a potential exit from our SMB within the next year or two. My question for the community: Is there a strategy for exiting SMBs similar to a 1031 exchange for real estate where the capital gains tax is deferred? If not, what are some other strategies to consider if we're not looking to cash-out?

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Reply by a professional-accounting
from Santa Clara University in San Francisco, CA, USA

Hey Austin, (CPA here) before setting up my current firm I was at Andersen where we handled transactions like this a lot. Unfortunately, the most common answer in tax is "it depends". QSBS is very limited in what qualifies and usually occurs in businesses that setup for that from the get go. An installment sale would spread out the gain pro-rata as you receive payments so overall the tax rate goes down since you don't have one big hit at the top bracket. If you aren't looking to "cash-out" you might consider whether you can qualify the income as "passive" which would make it much easier to offset your income with any passive losses from say real estate or old carry over losses. Happy to nerd out with you anytime redacted (PS I won't charge you for this it's for the love of the game)

Reply by an intermediary
from Arizona State University in Houston, TX, USA

I have not seen anything that would be similar to a 1031 exchange for real estate for business. Depending on the size of your company there are other strategies our clients have used such as seller financing and a deferred tax trust. You need to talk with a tax strategist who is competent in tax reduction strategies for transactions. At least you are thinking about it now.

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