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Business Owners  

Our specialty is providing services and resources for business owners and their senior management.

Business Succession and Continuation Planning

The owner of a closely-held business faces a series of unique problems when planning to sell his or her interest in the business.  Typically, an owner who would like to retire from a business can anticipate some difficulty in finding a buyer who is both willing and able to pay market value for the business, and who will be able to profitably operate the business once the retiring owner is gone.  Careful planning can allow an owner to successfully make this transition, achieve a profitable sale of the business, manage the risks associated with operating the business during the transition, and reduce any potential income tax liability.

  • Provide for shared ownership and control during the transition to the new ownership.
  • Create an orderly transition between owners.
  • Minimize potential conflicts that could disrupt successful business operations.
  • Create incentives for the parties to successfully operate the business for the benefit of both.

Funding the Sale

In some instances, the buyer will have the resources to pay the full purchase price, in cash. Borrowing the money, the sale of other assets, or private investors are all possible sources of funds.

Very often, however, the retiring owner will need to finance all or part of the sale and receive payments for the balance over a period of time. While this approach does entail a degree of risk, the sale can be structured as an installment sale, allowing for the deferral of reporting of both income and capital gain until the year payments are actually received.  An installment sale also replaces an income source that might otherwise be lost once the business is sold.

Death or Disability of the New Owner

If a retiring owner chooses to finance the sale of the business, continued payments are often dependent on the successful operation of the business by the new owner.  In the event of the death or disability of the new owner, the business may fail and payments to the retired owner stop.  The retiring owner can protect against these risks by requiring, as part of the sale agreement, that life and disability insurance be purchased on the new owner, with benefits payable to the retiring owner.

Income Tax Considerations

There may be a significant income tax liability when the business is sold.  Under an installment sale, the interest portion of each payment is treated as ordinary income. A sale of a business also usually involves capital gains or losses, although the tax treatment is dependent, in part, upon the form of the business entity sold.

Importance of a Business Continuation Plan

Competing Interests of Heirs & Surviving Owners

These interests are many and may include the following:

  • What Heirs of Deceased Owner Want
    • Top dollar for their interests
    • Prompt settlement of the estate
    • Set value of business for estate taxes purposes
    • Relief for family from worries regarding the business and its creditors
  • What Surviving Owners Want
    • Minimum cost for the interest
    • Prompt transfer of the business interest
    • Full control of the business -no interference from the decedent's family
    • Continuing relationships with creditors
    • Retention of customers and employees

Potential Problems Without a Written Agreement

Frequent results include:

  • Heated conflicts among the remaining owners and the decedent's family.
  • Unhappiness on all sides, and sometimes litigation.
  • Delays in settling the estate and continuing business growth.
  • Loss of customers and loss of business value.
  • Possible liquidation of the business which may bring less than full value.

The Solution: A Written Agreement (and Cash)

A written agreement can provide:

  • An orderly transfer of the operation, management, and ownership of the business.
  • A mutually agreeable sales price and preservation of business value.
  • Mutually agreeable terms of sale.
  • A value that is binding on the IRS for federal estate tax purposes.
  • Stability for customers, employees, creditors, and investors.

Buy-Sell Agreement

In order to guarantee a buyer for the interest in a business (particularly a minority interest which may be of very little value to one's heirs), consideration should be given to a lifetime agreement among the business owners as to how to dispose of the business.

Entity Plan

Under an entity plan the organization buys the interest of the deceased business owner. This type of arrangement is often used when there are several owners.

Line arrow: Straight with solid fillLine arrow: Straight with solid fillCorporation                             Agreement With Entity                      Owner #1

Partnership                                                                                              Owner #2

Or LLC                                


Cross-Purchase Plan

Line arrow: Straight with solid fillLine arrow: Straight with solid fillUnder this plan each surviving owner agrees to buy the interest of any deceased owner.

Owner #1                                                                                                 Owner #2

                                         Agreement Between Owners


An attorney should be consulted in deciding which plan is better.

Advantages of Buy-Sell Agreements

  • Guarantees a buyer for an asset that probably will not pay dividends to one's heirs.
  • Can establish a value for federal estate tax purposes that is binding on the IRS.  See IRC Sec.2703.
  • Spells out the terms of payment and is easily funded with life insurance and disability insurance.
  • Provides a smooth transition of completed ownership, management, and control to those who are going to keep the business going.

Owner Buy-Sell Agreements and Funding

Covers death, disability, retirement, and other defined triggering events. It specifies the terms of buy-out.

Having an agreement in advance:

  • Establishes an objective, predetermined valuation amount.
  • It provides a means for financing the buyout.

Seek Professional Guidance

The successful sale of a business interest requires careful planning, sometimes well in advance of an actual transaction. The guidance of experienced tax, legal, insurance, and other financial professionals is strongly recommended.


Key Employee Compensation & Insurance

It is difficult to attract talented and committed employees.  You also want to retain and reward them with special compensation plans.  These plans are subject to fewer regulations and allow you to establish fringe benefits for select key employees.  These plans can provide protection for the business and employee's family in case of death or in the event of disability.

Business Valuation Services

We offer business valuation services through the largest provider of business valuation, having valued over 33 million companies globally.  Their experience and knowledge base will provide valuable information in our report at a reasonable fee. 

The report will give four valuations: enterprise, equity, asset, and liquidation.  It will also provide Key Performance Indicators [KPIs] based on your industry metrics, which will assist you in improving profitability currently and increase the market value of your business.

Reasons to Have a Business Valuation:

  • The value of the business may be the most important asset in you overall financial portfolio. You should know the value since it will have a significant impact on lifetime retirement income.
  • Establishing a value for a buy-sell agreement. Having a value set before a triggering event will minimize the risk of disputes related to the agreement.
  • Preparing to sell the business.  To be prepared to market it, respond to unsolicited offers or unforeseen events.  Knowing the valuation allows you to be in a position of strength when negotiating the most favorable price for you.
  • Other reasons to have a business valuation: seeking equity or debt financing; insurance and risk planning; estate planning; and strategic planning.

Exit Planning-The Exit Map

Are you prepared to sell your business and retire?  Our Exit Map Assessment will provide you with a 12-page readiness summary, which includes scoring 5 distinct factors.  It is completely customized from your responses and requires no financial information.  We provide this confidential assessment report complimentary.

An exit plan is simply a strategic business plan with a defined time frame. It is the process of preparing for a transfer of a business owners' responsibilities.  In order to facilitate a successful transition and control the process, you have to plan.  This assessment tool will guide you.

To access the assessment questionnaire, please click on the link below.

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