# What should you do with the money after you sell your business?

By James Ustby, CFP®, APMA®. Published 2026-10-15. Canonical URL: https://jamesustby.com/articles/what-to-do-after-selling-business

> Set aside the tax first, park the rest somewhere safe and boring, and give yourself 90 days to plan. On a $5,000,000 sale the tax can top $1.2 million.

## Key takeaways

- Before you invest a dollar of sale proceeds, set aside the tax you will owe, park the rest somewhere safe and boring, and give yourself 90 days to build a plan for what the money has to do.
- In our hypothetical $5,000,000 stock sale with a $500,000 basis, federal capital gains tax, the 3.8 percent tax and North Carolina tax total about $1,224,789, roughly 24 percent of the price.
- FDIC insurance covers $250,000 per depositor, per ownership category, at each insured bank, so a multimillion dollar wire sitting in one account is mostly uninsured.
- Federal estimated tax for a fall 2026 closing is next due January 15, 2027, and the full balance is due April 15, 2027. Plan the cash for both before you spend or invest.
- The sale is the last paycheck the business pays you. The job of the proceeds is to replace that paycheck for the rest of your life.

## The short answer

Before you invest a dollar of sale proceeds, set aside the tax you will owe, park the rest somewhere safe and boring, and give yourself 90 days to build a plan for what the money has to do. On a $5,000,000 sale, the tax alone can be more than $1.2 million.

That order matters more than any investment choice you will make that year. Owners who sell have spent decades making fast decisions. The wire is the one moment where slow wins.

## What is the first thing to do when the wire lands?

Move the tax money out of reach. Open a separate account, label it for the IRS and the state, and put a careful estimate of the bill there the same week the wire clears. That one step prevents the most common and most painful mistake after a sale: spending or investing money that already belongs to someone else, then selling something at the wrong time in April to pay the bill.

Then look at where the rest is sitting. The FDIC insures deposits up to $250,000 per depositor, per ownership category, at each insured bank. A $3,000,000 balance in a single personal account at one bank is mostly uninsured. Spreading deposits across banks and ownership categories, or holding short term Treasury bills, keeps principal protected while you plan. Treasury bills are not FDIC insured, but they are obligations of the U.S. government.

## How much tax will you owe on a $5,000,000 sale?

Here is a worked example. It is a hypothetical, not a projection, and your numbers will differ.

Example: Robert and Ellen, both 62, married filing jointly, sell their Durham company in a stock sale for $5,000,000 in October 2026. Their tax basis is $500,000, so the long term gain is $4,500,000. They have $150,000 of other taxable income that year. For the illustration, we assume the full 3.8 percent tax applies and ignore deal costs and debt payoff.

| Line | Amount |
|---|---|
| Sale price | $5,000,000 |
| Tax basis | $500,000 |
| Long term capital gain | $4,500,000 |
| Federal tax on the gain at 15 percent (taxable income up to $613,700) | $69,555 |
| Federal tax on the gain at 20 percent (taxable income above $613,700) | $807,260 |
| 3.8 percent net investment income tax, if it applies | $168,424 |
| North Carolina tax at 3.99 percent | $179,550 |
| Total tax tied to the sale | $1,224,789 |
| Left to invest, before deal costs and debt | $3,775,211 |

The 2026 federal thresholds come from the IRS: the 20 percent rate starts above $613,700 of taxable income for a married couple filing jointly. The 3.8 percent tax applies to the smaller of investment income or the amount income exceeds $250,000, and the IRS notes that threshold is not indexed for inflation.

The 3.8 percent line deserves a closer look. The IRS counts gain on a partnership or S corporation interest as investment income only to the extent the owner was passive. An owner who actively ran the company may owe much less of it, or none, on that gain. In this example that is a $168,424 question, which is why your CPA should run the sale both ways before you close. You can test your own price, basis and structure in the [business sale calculator](https://jamesustby.com/business-sale-calculator).

## When is the tax actually due?

Sooner than most sellers expect. Federal estimated payments for 2026 are due April 15, June 15 and September 15, 2026, and January 15, 2027. For an October closing, the next payment date is January 15, 2027, and the full balance is due with the return on April 15, 2027.

The IRS safe harbor says you generally avoid an underpayment penalty if withholding and estimates cover 100 percent of last year's tax, or 110 percent if last year's adjusted gross income was over $150,000. The safe harbor only avoids the penalty. It does not shrink the bill. Robert and Ellen still need about $1.2 million in cash on April 15.

## What does the first year look like, step by step?

| When | Decision | Dollar at stake in the example |
|---|---|---|
| Before closing | Asset sale or stock sale, and how the price is allocated | Can move the tax by six figures |
| Closing week | Move the tax set aside to its own account; spread the rest within insurance limits or into short term Treasury bills | $1,224,789 set aside, $3,775,211 protected |
| First 30 days | CPA projection of the full year tax; plan the next federal and state estimated payments | Penalty exposure on $1.2 million of tax |
| By day 90 | Written plan: yearly spending, Social Security timing, the income the portfolio must produce | About $151,000 a year at a 4 percent rate on $3,775,211 |
| Months 4 to 12 | Invest in stages to match the plan; update wills, trusts and beneficiaries | The whole $3,775,211 |
| April 15, 2027 | File and pay the balance | Whatever estimates did not cover |

Notice where investing shows up. It comes after the tax is set aside and after the plan says what the money has to do. Run your own spending target through the [retirement income calculator](https://jamesustby.com/retirement-income-calculator) before you decide how much risk the portfolio needs to take.

## Should you pay off the mortgage or make big purchases first?

Wait 90 days. Paying off a mortgage can be a sound choice, because it lowers the income the portfolio has to produce every month. But it also locks cash inside the house, and it is hard to undo. The same goes for the second home, the boat and the gifts to children. None of these are wrong. They are simply better decided once you know the tax number and the income number.

A useful rule of thumb from experience: the first 90 days after a sale are for protecting the money, not for growing it or spending it.

## What is different in North Carolina?

North Carolina taxes capital gains as ordinary income at its flat rate, which is 3.99 percent for 2026, down from 4.25 percent in 2025, according to the North Carolina Department of Revenue. There is no separate lower rate for long term gains, so on a $4,500,000 gain the state bill is $179,550. North Carolina does not tax Social Security benefits, which helps once the sale proceeds start replacing your paycheck. If you are thinking about a move before a sale, talk to a tax professional first, because residency rules decide which state taxes the gain.

## Who should be on your team before you sign?

A CPA for the tax projection and the structure, an attorney for the purchase agreement and your estate documents, and a CFP® professional to turn the proceeds into a paycheck. The earlier these three talk to each other, the more choices you keep. If you are still a few years out, [how to value a business before a sale](https://jamesustby.com/articles/how-to-value-business-before-sale) and [what a cash balance plan can move out of the company before a sale](https://jamesustby.com/articles/cash-balance-plan-owner-contribution) cover the work that pays off most before closing.

## The bottom line

The sale is the last paycheck your business pays you, and the proceeds now have one job: replace that paycheck for the rest of your life. Set aside the tax first, keep the rest safe and liquid, and give yourself 90 days. In our example, about $1.2 million of a $5,000,000 price went to tax, and the $3,775,211 left had to fund three decades. Every decision after the wire flows from that one number.

If your business sold tomorrow, do you know how much of the price would actually be yours to spend?

If a sale is in your future, take the free [exit readiness scorecard](https://jamesustby.com/scorecard) to see where you stand today, and read the book [Before You Sell](https://jamesustby.com/book) for the full runway from valuation to the day the wire hits.

## Questions people ask next

### What to do with money after selling a business?

Set aside the estimated tax in a separate account, keep the rest in safe, liquid places that fit within deposit insurance limits or in short term Treasury bills, and take about 90 days to build a written plan. Decide what income the money has to produce before deciding how to invest it.

### Should I pay off my mortgage after selling my business?

Sometimes. Paying it off lowers the monthly income your portfolio must produce and removes a fixed bill, but it also locks cash in the house. Compare your mortgage rate with what safe money earns, keep enough liquid reserve for at least a year of spending, and decide after the tax is set aside, not before.

### How much tax do I owe the year I sell?

It depends on the sale structure, your basis and your other income. Long term gain above $613,700 of taxable income for a married couple filing jointly is taxed at 20 percent federally in 2026, the 3.8 percent net investment income tax may apply above $250,000 of income, and North Carolina taxes the gain at 3.99 percent. Our $5,000,000 example comes to about $1.22 million.

### Does the 3.8 percent tax apply when I sell my own business?

It depends on how you owned and ran it. The IRS counts gain on a partnership or S corporation interest as investment income only to the extent you were a passive owner, so an owner who actively ran the business may owe less or none on that gain. Asset sales and stock sales are treated differently, so ask your CPA to run both.

### Where should I put the money right after I sell my business?

Somewhere safe, liquid and boring while you plan: insured bank deposits spread across banks or ownership categories to stay within FDIC limits, or short term Treasury bills, which are not FDIC insured but are obligations of the U.S. government. The goal for the first 90 days is to protect principal and keep options open.

## Sources

- [IRS, Revenue Procedure 2025-32, 2026 inflation adjusted amounts (capital gains rate thresholds, standard deduction)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [IRS, Net Investment Income Tax](https://www.irs.gov/individuals/net-investment-income-tax)
- [IRS, Questions and Answers on the Net Investment Income Tax](https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax)
- [IRS, 2026 Form 1040-ES, Estimated Tax for Individuals](https://www.irs.gov/pub/irs-pdf/f1040es.pdf)
- [North Carolina Department of Revenue, Tax Rate Schedules](https://www.ncdor.gov/taxes-forms/individual-income-tax/tax-rate-schedules)
- [FDIC, Understanding Deposit Insurance](https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance)

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Author: James Ustby, CFP®, APMA®, Wealth Advisor, LPL Financial, Durham and Chapel Hill, North Carolina. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Examples are hypothetical and for illustration only. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA / SIPC. Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.