Liquidity is important in any business; however, small to medium size businesses are notoriously short on liquid assets because the value of the business is often tied up in equipment, materials, stock, and other non-liquid assets. This is particularly true if the business is relatively young. Federal and state gift and estate taxes, however, are calculated based on the value of your estate, without regard to whether your estate assets are liquid or non-liquid assets. If your estate lacks sufficient liquid assetsto pay the tax due, assets must be sold to pay off the debt. Selling assets, however, could put the entire operation out of business.