Tax-Smart Exit Planning with David Flores Wilson

In this episode of the DealQuest Podcast, I'm thrilled to sit down with David Flores Wilson, CFA, CFP, Managing Partner at Sinceres, a firm that advises entrepreneurs and business owners in New York City on personal financial planning from formation to exit and beyond. David brings an impressive array of credentials and a fascinating background that includes representing Guam in the 1996 Atlanta Olympic Games as a sprinter. He's a multiple Investopedia Top 100 Financial Advisor whose guidance has appeared in CNBC, Yahoo Finance, the New York Times, US News and World Report, and Investment News.

David's journey to financial planning took some unexpected turns. He grew up in Guam running a comic book arbitrage business as a kid, went on to work at Lehman Brothers through the financial crisis, and eventually discovered his true passion for helping entrepreneurs navigate the complex intersection of business planning, tax strategy, and wealth building. Whether you're thinking about QSBS planning, designing equity compensation structures, or preparing for a business exit, this conversation covers ground that could save you millions in taxes and help you build a business that serves your long-term goals.

FROM COMIC BOOK ARBITRAGE TO FINANCIAL PLANNING

David's entrepreneurial instincts showed up early. Growing up in Guam, he discovered a price differential between local comic book stores and mail-order catalogs. He would save money from working on his grandparents' farm, order comics from the mainland at lower prices, and sell them locally for a profit. His father was a CPA with a home office, and despite initially wanting nothing to do with that career path, David absorbed financial concepts through osmosis.

"I picked up some of these little bits of financial literacy, whether the rule of 70 or the power of being a business owner and living that sort of pre-tax lifestyle," David explained. That early education in arbitrage and financial thinking planted seeds that would eventually grow into a career helping entrepreneurs optimize their financial outcomes.

WHAT THE OLYMPICS TAUGHT HIM ABOUT CAREER BUILDING

David represented Guam in track and field at the 1996 Atlanta Olympics, competing in the 200 and 400 meters. What he learned there shaped his entire career philosophy. Unlike running, where there are diminishing returns and constant injury risk from pushing harder, David recognized that financial planning offers something different.

"I was like, I want a career where I can get a little bit better every single day. A little bit more tax knowledge, estate planning knowledge, business consulting," he shared. That incremental improvement mindset drives how he approaches client work today, constantly expanding his expertise to serve entrepreneurs better.

THE POWER OF QSBS PLANNING

QSBS, or Qualified Small Business Stock, might be the most powerful tax planning tool available to entrepreneurs, though it does not apply to everyone. If you have a C Corp, meet the holding period requirements, and operate an active business that qualifies, you can potentially exclude $10 million in capital gains from taxes, or 10 times your basis for older shares. For shares issued after July 4th under the new legislation, that exclusion jumps to $15 million.

The planning opportunities become even more interesting with LLC to C Corp conversions. A company that starts as an LLC, passes through losses in the early years, and then converts to a C Corp creates a unique situation where the market value at conversion becomes the basis for QSBS purposes. David gave an example of an LLC worth $7 million at conversion that could yield a $70 million exclusion rather than just $10 or $15 million.

QSBS STACKING AND TRUST STRATEGIES

One of the lesser-known aspects of QSBS planning involves what David calls "stacking." When you gift QSBS shares to family members or certain trusts, the holding period carries over and each recipient gets their own separate exclusion. Some founders have used non-grantor trusts to multiply their exclusions significantly.

David mentioned a public example that illustrates the potential. The CEO of Roblox set up 12 non-grantor trusts and secured 12 separate exclusions, totaling $120 million in capital gain exclusion on a several-hundred-million-dollar exit. This kind of planning requires working closely with CPAs, estate attorneys, and financial planners, but the tax savings can be transformative. For more on trust structures and estate planning in deal-making, our conversation with Kelly Finnell in Episode 325 about ESOPs touched on similar themes of using specialized structures to maximize owner outcomes.

WHY SERVICE BUSINESSES MISS OUT ON QSBS

There is a catch with QSBS that affects many business owners. Service businesses, including financial planning firms, law firms, and accounting practices, do not qualify. David joked that his business, my business, and his father's CPA practice all fall outside QSBS eligibility.

This limitation creates opportunities for creative structuring in certain situations. Some entrepreneurs run consulting businesses that also have software or product components. By separating the qualifying and non-qualifying activities into different entities, they can potentially capture QSBS benefits on the product side while continuing to operate the service component as an LLC.

THE LLC VS C CORP DECISION

The entity selection question goes far deeper than QSBS. David described a client earlier that day with a fast-growing, highly profitable software business structured as an LLC. All that income flows straight to their personal tax return, phasing them out of various deductions including the new $40,000 SALT deduction that will soon drop to $10,000.

The decision to convert involves weighing multiple factors. C Corps offer the 21% corporate rate and QSBS potential, but create double taxation when distributing profits beyond reasonable salary. LLCs allow losses to pass through in early years and offer more flexibility in distributions. And then there is the risk that a buyer might want an asset sale anyway, which can negate some C Corp advantages. This is exactly the kind of analysis Tom Dillon discussed in Episode 350 about understanding what your business is actually worth versus what you think it is worth.

EQUITY COMPENSATION DONE RIGHT

We spent considerable time discussing equity compensation, which is something I work on frequently with clients. The biggest mistake entrepreneurs make is choosing a vehicle based on what they like or what their friends did rather than what will actually attract, retain, and incentivize the specific people they want to keep.

I shared a story about a client who wanted to set up phantom equity for his top sales guy. I pushed back, pointing out that classic salespeople often prefer immediate compensation over long-term payouts. Sure enough, when my client approached his salesperson, the response was basically, "Can you just give me more commission?" The phantom plan ended up being implemented anyway, and the salesperson did appreciate it when the company eventually sold. But the point stands that different people respond to different incentives.

David expanded on this, noting that "equity" can mean many different things including participation in profits, upside potential, a seat at the table, or disclosure into financials. Owners often come in asking for a specific tool like profit interest or a cash balance plan without first clarifying what they are actually trying to accomplish.

THE REVERSE TRIANGULAR MERGER LESSON

One of my favorite moments in the conversation involved a client who came to me insisting he wanted to structure his acquisition as a reverse triangular merger because his buddy had done it and saved taxes. I had to stop him and ask the fundamental questions. Where are you now? What deal are you trying to do? Where do you want to end up?

Unsurprisingly, a reverse triangular merger was not the right structure for his situation. This happens constantly with sophisticated entrepreneurs who read about tools or hear about structures from their networks. They come in with a solution before fully understanding the problem. The best advisors push back and help clients think through objectives before jumping to execution.

PREPARING FOR LIFE AFTER THE EXIT

David has a designation in certified exit planning, and he starts implementing those concepts from the very first meeting with a business owner. The framework involves getting personally ready, financially ready, and business ready for a potential exit. What struck him early in his career was meeting business owners who had sold successfully but were failing in retirement.

"They had a good financial result, but they didn't have that sort of mission, that sort of purpose, that get up every day to get excited and work with the team," David observed. Even with life-changing money, entrepreneurs can become lost without the structure and identity that running a business provides. This echoes what Richard Manders shared in Episode 328 about the importance of planning what comes after the transaction. His coach made him create a list of the 20 most important people in his life and schedule meaningful time with them during the transition.

THE PHILANTHROPY QUESTION

I shared my own experience of going through a comprehensive process with my wife to clarify our philanthropic philosophy. We got very clear that we focus on transformational change rather than direct service. While direct service organizations are necessary and important, our view is that without people doing the work that creates fundamental change, the need for direct service never ends.

David acknowledged that the financial planning industry often focuses too heavily on the tax efficiency of charitable giving, things like bunching deductions, using donor advised funds, or setting up charitable remainder trusts. Those tools matter, but the deeper question of what impact you want to have and what will bring you fulfillment often gets lost in the optimization conversation.

CHANGES FROM THE ONE BIG BEAUTIFUL BILL ACT

The recent tax legislation has created new planning opportunities that business owners should review with their advisors. QSBS holding periods have changed, with three years now required for partial exclusion on shares issued after the act passed rather than the previous five years. SALT deductions, AMT rules, and various business deductions have all shifted.

David emphasized the importance of taking a fresh look at financial planning with this new lens rather than assuming previous strategies still make sense. In some cases, businesses that were close to QSBS thresholds might be able to amend returns, adjust their asset levels, and qualify for benefits they previously could not access.

I added a point about not letting politics interfere with taking advantage of available tax benefits. Even if you did not support the legislation, the rules exist. Take the savings and use them to support causes you care about or candidates you prefer. Ignoring legal tax reduction strategies out of principle is just leaving money on the table.

THE FREEDOM TO MAKE AN IMPACT

When I asked David about freedom, his answer reflected both his love of travel, having visited 72 or 73 countries, and his commitment to continuous improvement. For him, freedom means being able to make a bigger impact. Getting better at tax strategy, estate planning, and business consulting translates directly into better outcomes for the entrepreneurs and families he serves.

That perspective captures something important about why advisors like David find this work fulfilling. Every incremental skill improvement compounds into real differences for clients navigating complex financial decisions.

Tune in to this episode to hear David share his frameworks for QSBS planning, equity compensation design, and preparing entrepreneurs for successful exits. From the tax implications of entity selection to the personal readiness required for life after selling a business, this conversation covers critical ground for any business owner thinking about building long-term wealth.

Listen to the full episode of DealQuest Podcast Episode 390 with David Flores Wilson: 
[Available on all major podcast platforms]

FOR MORE ON DAVID FLORES WILSON
LinkedIn: https://www.linkedin.com/in/david-flores-wilson-cfp%C2%AE-cfa-02b5a/
Website: https://www.planningtowealth.com/

FOR MORE ON COREY KUPFER
https://www.linkedin.com/in/coreykupfer/
https://www.coreykupfer.com/

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

Get deal-ready with the DealQuest Podcast with Corey Kupfer, where like-minded entrepreneurs and business leaders converge, share insights and challenges, and success stories. Equip yourself with the tools, resources, and support necessary to navigate the complex yet rewarding world of dealmaking. Dive into the world of deal-driven growth today!