Unless owners plan to protect their wealth before they have it in hand, they cannot take advantage of all of the potential benefits of the tools in the wealth-preservation arsenal. A case study illustrates how an owner used one of those tools, a grantor retained annuity trust, to achieve financial security, provide for his family, and minimize taxes.
Full disclosure: Wealth-preservation planning can’t help any of us cheat death, but it can help business owners avoid taxes and achieve financial security.
The ideal Exit Plan (one that provides the business exit you desire) includes a strategy to help you preserve your ha... Read More
Season 5, Episode 8 was “The Barber”. The plot goes something like this: Jerry has been loyal to his barber, Enzo, for 12 years. His haircuts have gone downhill in quality over that time and his friends urge him to move on. So Jerry goes in to see Enzo’s nephew Gino for a haircut, thinking it was Enzo’s day off. It wasn’t, and Jerry ends up with another bad Enzo hair cut – really bad. To Jerry, the rubber band of loyalty (I just came up with that analogy myself, not bad) has stretched to the point of snapping. It’s going to hurt, but it’s time to move on to a new barber.
Now you might be asking why is a balding, middle aged man like myself writing about hair? What experti... Read More
There is a strong case for creating a buy-sell agreement for co-owned businesses. If owners agree about how to appraise business value and set the terms of payment in advance of any transfer event, they can avoid the heated and often damaging negotiations that can occur when one owner leaves the company.
In this issue, we continue making our case for buy-sell agreements by outlining several other advantages of a well-drafted and recently reviewed buy-sell agreement.
A buy-sell agreement can control all transfers of business ownership to the benefit of both the owner... Read More
This month, the University of Northern Iowa's Advance Iowa program is launching a free webinar focused on succession planning - Business Transitions: Planning Ahead for the Future of Your Business.
Succession planning is an easy thing to put off and not address until its too late. If you start early with the end in mind, you can avoid a lot of the conflict and create more opportunities for yourself. At the end, the goal is to transition your business according to your wishes. This may involve succession to a family member, selling the business to key employees, other interested parties or a number of other scenarios. Scott Bailey, Dan Beenken, and Jayne Kielman have been wo... Read More
Contemplating one’s own demise can be challenging but is paramount to sole owners and their businesses. Consider the fictional Harry Withers, the 54-year-old owner of Withering Hikes, a chain of seven retail apparel stores for outdoor enthusiasts on the Western Slope of the Rocky Mountains. One day, Harry disappeared while scouting new hiking trails.
After several months of fruitless searching, Harry’s family opened probate proceedings only to find that Harry’s once-thriving business also had disappeared. However, Withering Hikes’s disappearance was far more typical than Harry’s. Because Harry had dreamed of selling his compan... Read More
If you co-own your business, the business-continuity agreement (or buy-sell agreement) is one of the most important documents that you will sign. If you have a buy-sell agreement that is out-of- date, not reviewed, or focuses on the wrong issues, it may be worse than having no agreement at all.
Let’s start with a hypothetical case study that illustrates the importance of drafting a buy-sell agreement that anticipates and provides for all transfer events (lifetime transfers, disability, or death).
George Acme’s son-in-law, Tom Gardner, had been with George’s company for over 20 years. Tom had g... Read More
Steve Smith was no different than millions of other baby-boomer business owners in that the thought of leaving his business was never far from his mind, no matter how far away his exit might have been. He daydreamed about transferring the business to his oldest daughter and perhaps to a member of his management team, yet he couldn’t gauge their passion for owning a business and hadn’t tested their management skills.
And, of course, they had no money.
Steve’s company was his economic and financial lifeline. Without its income, his ability to use the business to accumulate wealth, the ability t... Read More
First of all, Jerry Springer is 73 years old, holy smokes – just another example of how time flies. Anyway, I wanted to shed some light on what I would call the “dark underbelly” of exit planning. We most often focus our time and attention on the technical aspects of succession planning work – tax strategies, estate planning, valuations, transfer of ownership, etc. etc. All of these are incredibly important to the process to be sure, but they shouldn’t be focused on to the extent of ignoring the other side of the coin – the personal side of transition – be it within a family or outside of it.
I’ve seen firsthand the chair throwing – to use a Jerry Springer Show analogy... Read More
Today, we discuss the essential elements of a plan owners use to transfer a business to insiders that keep the owner in control until he or she is paid the sale price. If you suspect that the children, key employees, or co-owners you would pick to succeed you do not have the funds to cash you out, consider the following 10 elements that make insider transfers successful.
Element 1: Time
A transfer to insiders takes time: time to plan, time to implement, and time for successors to pay the departing owner. Typically, the more time owners take to transfer the company, the less risk they incur and more money they receive f... Read More
In this issue, you'll find an outline of the primary reasons owners choose to exit via sales to third parties. Before you consider that option, you and your company must be prepared for the sale, and the M&A market should be favorable. Creating a written plan that minimizes taxes, allows you to focus on company profitability, and holds your advisors accountable for achieving your goals is key to the successful third-party sale.
If you think that planning for the biggest financial event of your life is a good idea and prefer an approach other than “wait and see,” what can you do to make sure your company is ready to sell when you decide the time is r... Read More