01
An Offer Has Come In
A buyer has approached, or a broker has a term sheet, and the owner needs to understand the tax picture before responding — not after signing.
Business Owners With Real Estate
Selling the business is one decision. Selling the real estate is another.
When a business sale includes property the company owns — a headquarters, warehouse, retail location, or land — the real estate may qualify for different tax treatment than the rest of the transaction. That only works if it's addressed before the deal is signed.
What to know before you negotiate
Structure
Asset sales, stock sales, and separate real estate entities are taxed differently. This is negotiated with the buyer, not decided afterward.
Real Estate
Only the real property portion of a sale may be eligible for a 1031 exchange. Goodwill, equipment, and inventory do not qualify.
Timing
Once a letter of intent or purchase agreement is signed, most structuring options are no longer available.
Team
Business brokers, M&A attorneys, CPAs, and a qualified intermediary each play a role — ideally before the business goes to market.
Common Situations
Why business owners come to us
These are the situations that typically bring business owners with real estate to a planning conversation — often earlier than they expected to need one.
02
Real Estate Held Inside the Business
The company's building or land sits on the same balance sheet as the operating business, with no separation between the two for sale purposes.
03
Planning an Exit in 1–3 Years
No offer yet, but retirement or a sale is the plan. This is the window where entity structure and real estate can still be reorganized.
04
Asset Sale vs. Stock Sale Disagreement
The buyer wants one structure, the seller wants another, and the real estate treatment is caught in the middle of the negotiation.
05
Considering a Leaseback
The owner wants to sell the business but keep the real estate, leasing it back to the buyer or a successor operator.
06
Large Gain, Limited Planning Time
A sale is in progress and the owner has just learned how large the tax bill could be — with weeks, not months, before closing.
Structure Matters
The same sale price can mean very different outcomes
How the transaction is structured — not just what it sells for — determines whether the real estate can be treated separately from the rest of the business.
Asset Sale
The buyer purchases individual assets — real estate, equipment, inventory, goodwill — item by item. This structure can make it possible to carve out the real estate and treat it separately, including as part of a 1031 exchange.
Stock Sale
The buyer purchases ownership interests in the entity itself, and everything the entity owns — including its real estate — transfers together. Separating the real estate for different tax treatment is generally harder once this structure is chosen.
A Third Path
Owners who hold their real estate in a separate entity from the operating business — set up well before a sale — often have more flexibility to structure the real estate portion independently, regardless of how the business itself is sold.
Why Timing Matters
The negotiation closes off your options gradually
Each stage of a business sale removes choices that were available at the stage before it.
Entity Structure
Separating real estate into its own entity generally needs to happen before a sale process begins.
Deal Terms
Asset vs. stock sale is negotiated with the buyer and difficult to revisit once a letter of intent is signed.
1031 Logistics
A qualified intermediary must be engaged before closing — not after funds have already changed hands.
Charitable Planning
Donating business or real estate interests to reduce a gain must happen before the sale is finalized.
The Critical Window
What's still possible — and what isn't — at each stage
Owners often assume there's more time to plan than there actually is. Here's roughly how the options narrow.
Before Listing
Entity restructuring, real estate carve-outs, and charitable strategies are all still on the table.
Most FlexibilityLetter of Intent Signed
Deal structure (asset vs. stock sale) is effectively set. Some real estate treatment may still be negotiable.
NarrowingPurchase Agreement Signed
Structure is locked. Remaining planning is largely limited to how proceeds are deployed after closing, such as a 1031 exchange on qualifying real estate.
Limited Options
Our Process
We start with the decision, not the product
Before discussing a 1031 exchange or DST, we work to understand the deal, the entity structure, and what you want the proceeds to do for you.
One
Review the Deal
Structure, terms, timeline, and whether real estate is separately identified.
Two
Map the Tax Picture
Where gain falls on real estate vs. other assets, and what's exchange-eligible.
Three
Clarify the Goal
Income, liquidity, continued real estate exposure, or a clean exit.
Four
Evaluate the Paths
1031 exchange, DST, direct reinvestment, or other planning strategies.
Five
Coordinate the Team
Work alongside your broker, M&A attorney, CPA, and qualified intermediary.
Free Resource
The Business Owner and Real Estate Exit Guide
A plain-language guide for business owners whose company owns real estate — covering deal structure, real estate carve-outs, 1031 exchange eligibility, and the questions worth asking before you sign anything.
- Asset sale vs. stock sale — how each affects your real estate
- When the real estate portion of a sale may qualify for a 1031 exchange
- Why holding real estate in a separate entity can preserve options
- What a leaseback arrangement can and can't accomplish
- How DSTs can fit as replacement property
- Questions to ask your broker, attorney, and CPA before negotiating
This guide is for general educational purposes only. It does not constitute investment, tax, or legal advice. Tax outcomes depend on individual circumstances and current law, which may change. Consult your CPA and legal counsel before making any decisions.
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Frequently Asked Questions
Business owners with real estate ask us
Straightforward answers to the questions that come up most in early conversations.
Only the real property portion of the transaction may qualify. A 1031 exchange applies to real estate held for investment or business use — not to goodwill, equipment, inventory, or other business assets. If your business owns its building or land, that real estate may be eligible even though the rest of the sale is not, typically requiring the purchase agreement to separately identify the real estate.
In an asset sale, the buyer purchases the individual assets of the business, and the seller's entity retains its legal existence. In a stock sale, the buyer purchases ownership interests in the entity itself, and the business — including its real estate — transfers as a whole. The structure affects tax treatment and whether real estate can be separated out for a 1031 exchange, and it's typically negotiated as part of the deal.
Many owners hold real estate in a separate LLC from their operating business, which can create flexibility at sale time — including leasing the property back to a buyer or completing a 1031 exchange on the real estate independent of the business sale. Whether this makes sense depends on your structure, and it generally needs to happen well before a sale is under negotiation.
Many of the choices that affect tax outcomes — entity structure, real estate carve-outs, charitable planning, and 1031 exchange logistics — need to be in place before a purchase agreement is signed. Owners who begin planning 12 to 18 months before an anticipated sale generally have more choices than owners who begin after receiving an offer.
A DST can be used as replacement property in a 1031 exchange involving the real estate portion of a business sale. It is not available for proceeds from goodwill, equipment, or other non-real-estate assets, since those proceeds are not exchange-eligible. Some owners separately evaluate strategies like Qualified Opportunity Zone investments for the non-real-estate portion of their gain.
Without advance planning, the real estate is often folded into the broader business sale and taxed along with the rest of the transaction, with no opportunity to defer the gain through a 1031 exchange. Once a letter of intent or purchase agreement is signed, restructuring the transaction to carve out the real estate is difficult and sometimes impossible.
Next Step
Still negotiating? That's the time to talk.
A short conversation before a purchase agreement is signed can clarify whether the real estate in your sale has options worth preserving.
This page is for general educational purposes only and does not constitute investment, tax, or legal advice. 1031 exchanges and DST investments involve risks and strict requirements. DSTs are illiquid, generally available only to accredited investors, and may result in loss of principal. Consult your CPA, attorney, qualified intermediary, and investment adviser before making decisions. Insight Investment Advisers is a Registered Investment Adviser.
