Tax is Offense, Not Defense
TheShenkinLetter
Financial leadership · Board governance · The long game
Issue #2 · Month 1 ~7 min read
CFO Leadership · Tax Strategy · Wealth Creation
Good morning —
Over the last several years, I've had conversations with entrepreneurs, real estate investors, and business owners who all shared one thing in common: they were spending enormous energy trying to minimize taxes after the fact.
That is tax defense.
And while defense matters, it's rarely where significant wealth is created. The people who consistently build and preserve wealth tend to approach tax differently. They don't wait until March to talk to their CPA. They build tax strategy into how they structure compensation, acquisitions, investments, exits, and ownership from the beginning.
That is tax offense.
Today's letter is about what that actually looks like in practice.
01 The Big Idea
Tax Offense vs. Tax Defense
Most tax planning in America happens backward.
The business owner has a good year. Income shows up. Maybe there's a surprise K-1. Maybe a liquidity event. Maybe a large capital gain. Then sometime between January and April comes the familiar question:
What can we do to reduce taxes?
By then, most of the meaningful decisions have already been made.
Real tax strategy happens before the transaction — not after the return is being prepared.
"The largest tax savings rarely come from deductions. They come from structure, timing, and intentional decisions made years before the taxable event occurs."
Tax offense means thinking proactively about:
How equity is issued
How entities are structured
When income is recognized
How compensation is designed
Whether a deal is an asset sale or stock sale
Where value appreciation will occur
How succession and estate planning align with ownership strategy
These decisions compound over time.
I recently reviewed a situation where founders were focused on maximizing EBITDA ahead of a future exit — which was absolutely the right operational focus. But they had never seriously evaluated whether they qualified for QSBS treatment, whether trust planning should occur before appreciation accelerated, or whether parts of the ownership structure would create avoidable state tax exposure during a sale.
Those are offensive tax conversations.
And they matter because once the LOI is signed, most of the leverage is gone.
The same principle applies to closely held businesses and family offices. Sophisticated families don't merely ask, "How do we reduce taxes this year?" They ask:
What assets should appreciate outside the taxable estate?
How should future generations participate in ownership?
Where do we create liquidity?
What is the most tax-efficient path to a transition event?
How do we avoid forcing future decisions under pressure?
Tax defense reacts to outcomes.
Tax offense designs them.
02 One Number
90%
Approximately 90% of privately held businesses in the United States are structured as pass-through entities.
Many of them were formed quickly, inexpensively, and without long-term exit strategy in mind. Years later, owners discover that the original structure — which may have saved a few thousand dollars early on — can create millions in unnecessary tax friction during a transaction or generational transfer.
The earlier strategic planning begins, the more options exist.
03 What I'm Thinking About
One of the biggest mindset shifts founders and executives struggle with is understanding that tax strategy is not separate from business strategy.
It is business strategy.
I've seen leadership teams spend months debating marketing spend, pricing models, and hiring plans while treating tax structure as an annual compliance exercise delegated entirely to outside preparers. Meanwhile, the ownership structure quietly determines how much of the eventual outcome the founders actually keep.
The best operators I know understand something important:
Every major financial decision has three outcomes:
Operational outcome
Legal outcome
Tax outcome
Elite leadership teams evaluate all three simultaneously.
And frankly, this is where experienced CFOs and board members create disproportionate value. Not by preparing returns — but by helping management see around corners before decisions become irreversible.
04 Office Hours
If this issue resonates with you, it may be time to shift from reactive tax conversations to proactive tax architecture.
Whether you're:
Preparing for a future liquidity event
Evaluating entity structure
Thinking about succession planning
Navigating complex partnership issues
Building investor-ready financial infrastructure
Or simply trying to become more intentional about long-term wealth preservation
— these are conversations worth having before the pressure arrives.
Reserve 15 minutes with Bill. No pitch, no deck. Just a direct conversation about your business, your goals, and whether strategic financial leadership could materially improve the long-term outcome.
