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Business Succession Planning

CREATING A VIABLE BUSINESS PLAN

The number of business owners approaching or past retirement age is staggering. It has been speculated that most do not have a business succession plan and most businesses do not last past the owner’s death or retirement—many times destroying the value built by the owner. Our process allows for a path to creating a viable business plan—usually allowing the owner to convert equity into liquid funds. Also if a business is sold under traditional methods, massive taxes may have to be paid. For example, on a hypothetical sale of a business for $1,000,000, $855,629 in taxes may be due by the seller and buyer conjunctively. The seller of the stock may pay a federal capital gains tax of $200,000, assuming a federal capital gains rate of 20%. The purchaser of the business must generate $1,655,629 of ordinary income from operations to pay the federal income tax of $655,629, and leave $1,000,000 as after tax payment for the stock, assuming a federal tax rate of 39.60%. Through our income tax strategies, the business can be transferred with much lower taxes.
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