Every December of your owning life, you and your CPA have played the same game: push income down, pull expenses forward, minimize the year’s tax bill. It’s a fine game, and if there’s any chance you’ll sell in the next two or three years, it’s now the wrong game, because the year-ends you’re about to close are the exhibits a buyer’s diligence team will grade. The owner optimizing for this April and the owner optimizing for a sale price are making opposite moves in December, and knowing which owner you are is worth real money in both directions.
Here’s the year-end checklist for the second owner.
Stop minimizing the picture you’re about to sell
The core inversion first. Every dollar of income you suppress at year-end saves you roughly your marginal tax rate, call it 30-something cents. Every dollar of earnings a buyer believes gets multiplied at 4x to 6x. Suppressing $50k of profit to save $17k in tax, in a year that lands in your trailing-twelve-months during a sale, can cost $200k of price. The arithmetic is that lopsided, and yet the habit is so ingrained that owners keep making the trade unconsciously.
The practical version: stop running the December expense sprint (the equipment you don’t need yet, the prepaid everything, the bonus timed purely for deduction). Book revenue when it’s earned, not when the tax picture prefers it, because revenue-recognition games are the first thing a QoE review unwinds, and games unwound by a stranger cost more than games never played. And if you’ve been running the business partly through cash habits that understate income, this is the December to end it, permanently. Unreported income doesn’t add back. It just subtracts trust.
Addback hygiene: make December the documentation month
Your addback schedule is built or broken at year-end, because December is when the personal and the one-time expenses either get documented or get blended into the noise. The moves: sweep the year’s GL for personal items (vehicle, travel, family phone plans, the club) and either move them out of the business cleanly or into clearly-labeled accounts with receipts attached. Tag the genuine one-times (the lawsuit, the office move, the ransomware consultant) in the ledger now, with the invoices filed, while everyone remembers what they were. Update the running addback spreadsheet you started after reading this blog, or start it today with three years of history while the books are open anyway.
The same sweep should catch the reverse adjustments a buyer will make whether you do or not: below-market rent from your building LLC, the family member paid under (or over) market for real work. Knowing those numbers in December beats learning them in diligence.
Normalize your own comp, deliberately
Owner compensation is the largest single adjustment in most MSP deals, and year-end is when it’s set. If you’ve been paying yourself far below market to dress up profit, understand that a buyer subtracts a market-rate replacement anyway, so the dressing fools no one while it distorts everything else (payroll taxes, retirement contributions, the S-corp reasonable-comp question your CPA already nags about). If you’re far above market, the addback recovers it, but only with clean documentation of what you actually do. The stable play for a pre-sale year: set comp near the defensible market rate for your actual role, document the role, and let the P&L tell the truth without translation. Boring, consistent, and exactly what the ten-minute screen rewards.
The entity conversation to have before the ball drops
Some structural questions only work with calendar years of runway, which makes December the deadline for raising them, even if the answer is “not for us.” Put these on the CPA meeting agenda:
Entity type and the sale. If you’re a C corporation, the double-tax exposure in an asset sale needs a plan measured in years, not weeks. If you’re an S-corp or LLC, confirm there’s nothing broken (a blown S election, a stale operating agreement, missing state filings) before a buyer’s lawyer finds it.
The QSBS clock. For owners five-plus years out, the C-corp conversion question is a this-December decision precisely because the five-year clock only starts when you do.
State residency. If a move to a no-income-tax state is genuinely in your future, the residency clock rewards starting years before a transaction, and January 1 is the cleanest possible start date for a residency year.
The estate layer. Gifting minority interests to kids or trusts works best before a sale process establishes a high valuation. That’s a specialized conversation (it gets its own post later this series), but it belongs on this December’s agenda if wealth transfer is on your horizon at all.
The meta-move
Notice what every item above shares: none of it requires deciding to sell. It’s all reversible, all defensible, and all good hygiene even if you own the company another decade. That’s the standard for pre-sale tax work in general, and it’s why this belongs in the two-year runway rather than the deal sprint: the owner who spends two Decembers making the books tell the truth walks into any process with exhibits instead of explanations. Ask your CPA for ninety minutes this month with one agenda line: “assume I sell in two or three years; what does this December look like?” It will be the highest-leverage meeting on your calendar, and note what just happened to the old game: the best tax move of your owning life turns out to be preparing to pay more tax, sooner, on purpose, because the multiple pays better than the deduction ever did.
This article is general education, not tax advice. Tax outcomes turn on facts we can't see from here: your entity, your state, your history. Bring anything you read on this blog to your CPA before acting on it.