How to Replace Business Income With a Personal Paycheck

What’s the best way to pay myself now that the business is no longer there?

It’s a question many owners ask after a sale. For years, income came from salary, distributions, or quarterly bonuses tied to the business. Now that structure is gone, and even with liquidity in place, the absence of steady cash flow can feel unsettling.

Creating a personal income plan that provides stability, tax efficiency, and long-term flexibility is essential. And while this work can be done after the deal closes, the truth is that the best time to start is one to three years before a sale. With more time, we can map out your income needs, test different strategies, and structure assets in a way that is more tax-efficient and tailored to the life you want to live after the exit.

Start With Real Numbers, Not Just a Guess

One of the first things we do in this phase is help owners understand their actual income need. Not just a round number or a target lifestyle, but a line-by-line look at what it takes to support your household and goals.

This process usually includes:

• Housing: Mortgage or rent, property taxes, insurance, utilities, maintenance

• Healthcare: Private insurance premiums, out-of-pocket expenses, HSA strategy

• Family support: College tuition, child support or alimony, care for aging parents

• Lifestyle: Travel, dining, club dues, personal hobbies

• Giving: Church or charitable commitments, donor-advised fund contributions

• Taxes: Federal and state income tax, property tax, quarterly estimates

• Discretionary: One-off expenses like home renovations, car upgrades, or second home considerations

We help clients build a detailed spending model, often for the first time in their lives, so the plan is not just theory. It is based on how you actually live, what matters to you, and what is likely to evolve.

Choose Where Income Comes From, and Why That Matters

After a sale, most owners have assets in multiple places: business proceeds, trust accounts, retirement plans, real estate, private notes, and brokerage accounts. Each comes with different tax characteristics and liquidity profiles.

We do not just look at what is available. We look at what is most efficient to draw from first. For example:

• Using municipal bond ladders or dividend income for baseline cash flow

• Timing installment sale payments to smooth income over several years

• Deferring IRA distributions if we can harvest capital gains at lower rates

• Using Roth accounts strategically during years with minimal other income

• Keeping a reserve of liquid funds to avoid selling assets during down markets

The sequencing of distributions is not just tactical. It can materially change how long your portfolio lasts and how much you keep after taxes.

Add Rhythm to Avoid Stress

It is common to feel uneasy the first time you withdraw money from a portfolio. Even if the funds are there, the lack of a regular paycheck can create anxiety.

We often recommend establishing a monthly or biweekly distribution schedule that mimics the pay cadence you had while running the business. These distributions move from your investment or trust accounts into a personal checking account. From there, your spending can continue with confidence.

We also encourage setting up automatic tax withholding and a reserve fund for one-off expenses like travel or tuition. This helps smooth your cash flow and keeps your core investments working in the background without interruption.

Anticipate Inflation and Tax Drag

This part often gets overlooked. Even a carefully designed income stream loses power over time if inflation is not considered. Likewise, drawing heavily from a taxable account with high turnover can erode returns if not managed properly.

Your plan should:

• Identify where income is taxed as ordinary income versus capital gains

• Run projections under different inflation scenarios

• Include targeted Roth conversions, especially in low-income years post-sale

• Allocate assets intentionally across tax buckets (taxable, tax-deferred, tax-free)

This is also where multi-year coordination with your CPA, estate attorney, and financial planner becomes essential.

It’s Not Just About Distributions. It’s About Direction.

Replacing income after a business sale is not a plug-and-play exercise. It is a personal process. The right plan is one that reflects how you want to live, not just this year, but ten, twenty, or thirty years from now.

We help business owners and their families build personal income strategies that are structured, tax-smart, and designed to grow with them. That process works best when it starts early, before the business is sold, so we can design a plan that moves with intention and not reaction.

Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should consult with their qualified legal, tax, and accounting advisors before implementing any strategy discussed herein.

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