How to Cash Out of Your Business Without Selling Out?

Team Acquira
-  April 12, 2024
What You’ll Learn
  • How to prepare your business for a smooth transition.
  • What key strategies allow cashing out without outright selling.
  • Why considering tax implications is crucial in exit strategies.
  • How to avoid common pitfalls when exiting a business.
  • What legal considerations you must address before exiting.

Exiting a small business is a monumental decision that comes with its unique set of challenges and opportunities. 

It’s not merely about financial gains but preserving the legacy, ethos, and values of the company. 

Let’s look at ways for business sellers to cash out effectively without undermining the very integrity and core principles their businesses were built upon. 

This is how you cash out of a small business without selling out.

Why Do Business Owners Sell Their Businesses?

There are big things to consider before selling your business.

Owning and operating a small business can be an exhilarating journey, filled with highs, lows, problems, and successes. 

But like all journeys, there comes a time when you might think about a change in direction or even an endpoint. 

While selling the business is a common route, many entrepreneurs consider alternative pathways. 

Let’s delve into some reasons why you, as a small business owner, might want to exit without selling.

  • Retirement: One of the most prevalent reasons for business owners wanting to exit is the desire or need to retire. After years or decades at the helm, it’s only natural to want to hang up your entrepreneurial boots and enjoy the fruits of your labor. Retirement doesn’t necessarily mean parting ways with the business entirely; it could be about reducing active involvement.
  • Pursuing New Ventures: Entrepreneurial spirits are always on the hunt for fresh challenges and opportunities. You might have another business idea brewing or wish to explore different industries. Exiting your current venture can provide the time, resources, and focus needed for these new pursuits.
  • Reducing Involvement: Burnout is real. There might be periods where you feel the weight of business responsibilities taking a toll. Rather than selling, you might simply want to step back, either temporarily or permanently, and reduce your active involvement.

As you consider these possibilities, it's important to clearly define your personal and financial goals. 

What do you envision for your life post-exit? How do your financial aspirations align with this vision? 

By addressing these questions, you’re better positioned to choose an exit strategy that resonates with your objectives.

Reasons to Take Money Out Of a Business

  • Minimize Risk: Diversifying personal wealth is a cornerstone of sound financial planning. By taking out money from your business, you reduce the risk of having most of your net worth tied up in one venture.
  • Save on Taxes: There are several tax-efficient methods to extract money from your business. By strategically planning withdrawals, you can potentially reduce your tax burden.
  • Personal Compensation: As the business owner, you’ve invested time, effort, and capital into the venture. Drawing money out can serve as compensation for the hard work, acting as a reward or even funding personal aspirations like travel, education, or home purchase.

Key Strategies for Cashing Out Without Selling

how to cash out of a small business

1. Transitioning to a Family Member or Trusted Employee: Transitioning involves passing the ownership and operations of the business to a family member or a trusted employee, ensuring that the company remains in familiar hands.


  • Continuity: Maintains operational consistency and causes minimal disruption.
  • Legacy Preservation: Keeps the business and its values within the family or close circle.
  • Gradual Transition: Allows for a phased reduction in the owner’s involvement.


  • Emotional Complexity: Merging family and business dynamics can introduce conflicts.
  • Valuation Disputes: Disagreements may arise over the business’s worth and its new leader’s compensation.
  • Skill Mismatch: The successor might not possess the necessary skills or vision for the business.

2. Employee Stock Ownership Plans (ESOPs): An ESOP is a financial vehicle that allows employees to become partial owners of the company by holding its stock, offering a way for owners to sell portions of their stake over time.

Read more: How To Sell To Your Employees


  • Employee Morale: Elevates commitment and enthusiasm among employees.
  • Tax Benefits: Provides potential tax advantages for both the business and the selling owner.
  • Smooth Transition: Ensures that ownership transition is gradual and methodical.


  • Complexity: Establishing an ESOP demands careful planning and expertise, and can be difficult for participants to grasp.
  • Cost: There are significant costs involved in setting up and managing an ESOP.
  • Liquidity Concerns: Complete cashing out may be time-consuming depending on the ESOP structure.

3. Leveraged Buyouts: A leveraged buyout (LBO) involves outside entities buying a company primarily using borrowed funds, often with the company’s assets as collateral.


  • Immediate Liquidity: Owners can quickly access capital through the deal.
  • Retained Equity: Owners can keep a share of equity and potentially benefit from future growth.


  • Debt Burden: The company might take on substantial debt, affecting its financial stability.
  • Due Diligence: The process requires an in-depth review which can be intrusive and lengthy.

4. Licensing Intellectual Property: Licensing allows businesses to grant rights to their intellectual property (like patents or trademarks) to another entity in return for royalty payments.


  • Recurring Revenue: Ensures a consistent stream of income without giving up IP rights.
  • Market Expansion: Allows penetration into new markets without operational hassles.


  • Loss of Control: Risk of mismanagement or misuse of the licensed IP.
  • Contractual Complexities: Necessitates detailed negotiations to secure a fair deal.

5. Securities-Based Lines of Credit: This approach allows business owners to borrow money using their securities (like stocks or bonds) as collateral without selling them.


  • Liquidity: Immediate access to funds.
  • Ownership Retention: The potential for asset appreciation remains with the owner.


  • Collateral Risk: A decline in securities’ value may lead to additional capital calls or forced sales.
  • Interest Costs: Borrowing comes with associated costs.

Exploring these strategies with financial and legal experts can help business owners determine the best route for their unique circumstances, ensuring both financial gain and the continuity of their venture.

Business Preparation for a Smooth Transition

When preparing for a transition, it’s crucial for business owners to implement a structured plan, ensuring that every step is managed methodically. 

Here’s a guide on preparing your business and avoiding common pitfalls:

Organizing and Documenting Key Processes and Information:

  • Documentation: Compile manuals or guides that detail day-to-day operations, protocols, and any specialized knowledge. This not only aids the transition but also will prove valuable for future training.
  • Digital Assets: Ensure that digital tools, platforms, and accounts are organized and accessible. This includes vendor contacts, client lists, social media accounts, and any proprietary software or digital tools.

Identifying and Training Potential Successors:

  • Internal Evaluation: Scan within the company for potential leaders. Often, employees already possess a deep understanding of the business dynamics.
  • Mentorship: Once potential successors are identified, initiate a mentorship process. This should not just be about tasks but also about instilling the company’s culture and values.

Evaluating the Business’s Market Value:

  • Professional Appraisal: Consider hiring professionals to evaluate the company’s worth. This can aid in negotiations and planning.
  • Assets and Liabilities: Conduct an in-depth audit of all assets, including intellectual property, real estate, and digital properties. Understand and document all liabilities as well.

Legal and Financial Considerations:

  • Contracts Review: Ensure that all business contracts, leases, and obligations are up to date. A potential buyer or successor will want to review these.
  • Clear Outstanding Debts: If possible, try to clear any significant debts. This can enhance the business’s valuation and make it more attractive for a transition.

Tax and Legal Implications

Different exit strategies come with varied tax implications. Here’s what you need to keep in mind:

  • Capital Gains: When selling a business, the profits might be subject to capital gains tax. The rate can vary depending on how long you’ve held the assets.
  • Estate Taxes: If transitioning the business as part of an inheritance, be aware of potential estate tax implications.
  • Contracts and Agreements: Structuring a transition often requires new contracts or modifications to existing ones. Ensure that all agreements are legally sound and beneficial to all parties.

Common Pitfalls to Avoid

  • Inadequate Planning: Rushing the transition process or failing to plan can lead to undervaluation or operational disruptions.
  • Wrong Exit Strategy: Not all exit strategies suit every business. Ensure that your chosen strategy aligns with your business model, market conditions, and personal goals.
  • Ignoring Tax and Legal Implications: Failing to account for taxes can lead to significant financial losses or legal complications. Always consult with a tax professional and legal counsel to navigate these waters.

A successful business transition is a blend of meticulous planning, keen foresight, and a deep understanding of the business’s core values and operations. 


Can A Small Business Continue Without Being Profitable? 

Yes, many small businesses operate at a loss, especially early on. However, sustained unprofitability isn’t good and requires external financing or personal investment to cover operational costs.

Can I Transfer Money From Business To Personal Account? 

Yes, business owners can transfer money to personal accounts, typically as draws or salaries. However, it’s crucial to properly document transfers and understand tax implications.

Can I Sell A Business That Isn’t Profitable? 

Absolutely. While profitability enhances appeal, other assets like customer base, intellectual property, or potential growth can attract buyers to a non-profitable business.

What Is The Minimum Cash For A Business? 

There’s no fixed minimum, but every business needs enough cash to cover startup costs and sustain operations until it achieves a positive cash flow. This varies based on the business type and industry.


It’s possible to cash out without selling out, allowing you to get some of the value while also preserving your business's legacy and ethos.

It’s possible to cash out without selling out, allowing you to get some of the value while also preserving your business’s legacy and ethos. 

By exploring various methods, from family transitions to licensing intellectual property, owners can ensure financial success while upholding their foundational values. 

Proper preparation and expert guidance are paramount in this nuanced journey.

If you’re thinking about cashing out of your small business, consider reaching out to Acquira today to see how we can help. We have access to hundreds of qualified buyers and can offer you a free business valuation to get you started. 

We’ve also bought and sold dozens of businesses so we understand the emotional journey of selling something you’ve worked on for years, if not decades. You want to maximize your exit while also preserving your legacy. We can help you walk that tightrope. 

Fill out the form below to get in touch. 

Key Takeaways

  • Exit strategies go beyond mere financial gains; it’s about preserving the business legacy.
  • Transitioning to family or trusted employees maintains operational continuity.
  • Employee Stock Ownership Plans boost employee morale and commitment.
  • Intellectual property licensing can yield consistent income without selling assets.
  • Proper documentation and valuation are essential steps for successful transitions.
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