Not every plumbing business sale is a full exit. Increasingly, owners are selling a partial stake — either a minority interest (under 50%) or a majority interest (over 50%) — while retaining some equity and continuing to run the business. Understanding the difference between these structures, and what each means for your control, your taxes, and your eventual full exit, is important before you enter any negotiation.
Minority Sale: Selling Less Than 50%
In a minority sale, you sell a portion of your ownership — say, 30% — to an investor or partner while retaining majority control of the business. You continue running the company, making operational decisions, and driving strategy. The investor receives dividends or distributions proportional to their stake and may have certain governance rights (board seat, approval rights on major decisions).
Minority sales are often used to: bring in a capital partner for growth, provide partial liquidity to the owner without a full exit, or bring in operational or strategic expertise. They're less common in PE transactions (most PE firms want majority control) but do occur in family office and growth equity deals.
The challenge: minority investors have limited protection unless they negotiate specific rights. Without "drag-along," "tag-along," and information rights in the operating agreement, a minority buyer has little control over when or how they eventually get their money back.
Majority Sale: Selling More Than 50%
In a majority sale (which includes the most common PE recapitalization structure), you sell controlling interest — typically 60–80% — to a buyer who now has operational and strategic control. You retain 20–40% as rollover equity.
This is the most common structure for PE-backed plumbing business acquisitions. You receive significant liquidity at close (the "first bite") while maintaining enough equity to benefit meaningfully if the buyer grows the platform and sells it in 4–7 years (the "second bite").
The key difference from a minority sale: the buyer has control. They can make decisions about hiring, strategy, branding, and ultimately the eventual sale of the business — even if you disagree. Understanding this loss of control is essential before committing to a majority sale.
The Control vs. Liquidity Trade-Off
| Structure | Liquidity at Close | Control After Close | Future Upside |
|---|---|---|---|
| Full sale (100%) | Maximum | None | None |
| Majority sale (60–80%) | High | Low — buyer controls | Significant if platform grows |
| Minority sale (20–49%) | Partial | High — you retain majority | Depends on future liquidity event |
| No sale (bootstrapped growth) | None | Full | All upside, all risk |
Tax Considerations in Partial Sales
Selling a partial stake triggers a taxable event on the portion sold. If you sell 70% of your plumbing business for $3.5M (on an implied $5M total value), you'll recognize a taxable gain on $3.5M — calculated based on your basis in the sold shares.
Your retained 30% stake doesn't trigger tax until you sell it in a future transaction. This means your tax is spread across two events — close and eventual exit — which can be beneficial from a bracket management perspective. Work with a CPA who understands partnership and S-corp equity transactions to model the specific impact.
→ Plumbing Business Recapitalization Explained The most common majority sale structure in the trades → Should I Sell My Plumbing Business Now or Wait? Evaluating your timeline and whether a partial sale could be the answerDISCLAIMER: The information on this page is provided for general informational and educational purposes only. It does not constitute — and should not be construed as — financial advice, investment advice, legal advice, tax advice, or any other form of professional advice. Nothing on this site creates a professional advisory relationship between you and Lightning Path Partners. Business valuations, transaction structures, and market conditions discussed herein are general in nature and may not apply to your specific situation. Always consult a qualified financial advisor, M&A attorney, business broker, or CPA before making any business or financial decisions. Full Terms of Use →
There's a Third Option PE Firms Won't Tell You About.
PE takes majority control and runs on their timeline. Strategic buyers often mean a culture shift. There's a different kind of partner: someone who takes a minority stake, brings Hook Agency's marketing firepower and personal investment, and helps you build the business buyers compete to acquire.
Talk to Tim About the Third Option