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New Opposition to Estate Tax Rule from Presidential Administration Could Affect Business Owners with Wealth

October 9, 2017

Filed under: Business Planning — Neel Shah @ 9:15 am

The Treasury Department is currently evaluating a proposed regulation that could change how wealthy business owners are eligible to pass on businesses to their children or other heirs. individuals are currently able to discount valuations of stakes in a family owned business to minimize the taxes due upon transfer. business estate plan

A 40% levy could be applied to estate values greater than $5.49 million. The proposed rule under section 2704 of the Tax Code could eliminate these business valuation discounts and therefore, a critical tax planning strategy that has been referenced by many people who own businesses and are extremely wealthy. According to Treasury Secretary, the IRS and the Treasury believe that these regulations should be completely withdrawn and believe that the rule is unworkable.

The primary aim under the previous presidential administration that created the rule was to prevent people who had a great deal of wealth to put marketable securities into their company much like a limited partnership and then transfer those securities at a discounted valuation. The IRS interpreted this as gaming the systems. As a business owner, you’ll likely have concerns about protecting not just your individual interests, but your business interests, too. Having an estate and transition plan for both is important.

If you have further questions about how to protect your business assets and to do so legally, contact a New Jersey estate planning lawyer today.

Entrepreneur Estate Planning Tips

November 14, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Many entrepreneurs have one thing in common: they tend to like to do everything by themselves, at least when the company is started. Over time, however, what tends to separate the extremely successful from the barely surviving is being able to tap into other resources and surrounding the entrepreneurial journey with a team of professional advisors who help him or her implement short and long-term strategy. 

Entrepreneurs have unique estate planning needs. In addition to thinking about the future of their own assets, it’s equally important to consider the future of the business, too. Finding the right estate planning attorney can have a big impact on an entrepreneur’s ability to plan. There are five primary tools that most entrepreneurs should consider when putting together their estate and their long-term business planning. Meeting with the right lawyer can help to identify the best opportunities to move forward with estate planning while keeping the future of the company in mind as well.

The top six tools that can help an entrepreneur include:

  • A trust
  • A buy-sell agreement
  • A trust
  • Power of attorney
  • A will
  • A succession plan

In many cases, the estate planning for an entrepreneur may be infused with both individual and business plans. This is why it’s so crucial to identify an attorney who understands that and works to create a comprehensive and personalized plan for the business owner. Having to suddenly exit the business due to incapacity, for example, can raise a lot of questions for the entrepreneur about who is empowered to make medical or financial decisions for the business owner but also how the company will be handled, whether it’s a short or long-term absence.

Entrepreneurs frequently pour their heart and soul into founding and growing a company. Determining the most appropriate way to protect it is equally important. Make sure you identify an estate planning lawyer with experience helping individuals as well as business owners with estate planning and succession planning needs. The right lawyer can give you a lot of peace of mind about the future.

SBA Loans and Your Trusts

August 18, 2016

Filed under: Business Planning — Neel Shah @ 9:15 am

When the Small Business Administration lending partners come across an applicant who has ownership interests or assets inside a trust, the first question made by that lender is whether or not the trustee or the trust itself needs to be a borrower or a guarantor on that loan.estate planning attorney NJ

The answer is that if the trust in any way benefits from the loan, then it should be classified as a borrower. However, lenders need to also keep in mind that the answer could be impacted by the actual terms of the trust agreement in addition to any state or federal laws. A trust does not have to meet criteria ‘small’ under SBA regulations in order to qualify for a Small Business Administration loans. Beneficiaries of the trust are not considered for eligibility purposes and they are not also required to be guarantors of a Small Business Administration loan. If the trust owns 20% or more of the small business applicant, then that trust has to guarantee the loan and the trustee should sign the guarantee on behalf of the trust.

Lenders may also need to be aware that certain state laws and the terms of some trust agreements may require that the assets inside the trust can be held in title by the trustee individually rather than in the name of the trust. These issues can be complicated and require the insight of a knowledgeable attorney when you go through the process of putting together your trust itself. Do not hesitate to reach out to a New Jersey estate planning attorney sooner rather than later in order to protect your interests and to understand how these issues could potentially impact this.

What Mark Zuckerberg Can Teach About Business Succession Planning

June 1, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

The business succession planning strategy of Mark Zuckerberg could have important ramifications for individuals who are approaching retirement and thinking about whether or not it is time to move on. business succession planning NJ

For example, Sumner Redstone, a multi-billionaire, is currently locked in an argument with trustees and his family over the control of his companies, Viacom and CBS. One of the key takeaways that Sumner and other individuals approaching retirement without a business succession plan can learn from Mark Zuckerberg is that there are key generational differences in the way that entrepreneurs build their companies.

In all situations, it’s in your best interests to avoid winding up in Redstone’s situation. You might assume that exiting the business is so far in the future that you don’t need to worry about it, but this is a mistake. In fact, there are many reasons that you may wish to exit or sell the business outside of death of an owner, and planning ahead for these can make for a smoother transition when the time comes.

A new survey from U.S. Trust found that younger business owners are planning to exit their companies and raising money in ways that are quite different from older generations even though many of their key concerns about eliminating or moving on from their role in the business are the same across generations. The younger generation deals with succession planning in very different ways.

Although two-thirds of current business owners do not have a formal exit strategy, and for the baby boomer population only 52% of younger business owners do not have an exit strategy in place. To learn more about how a business succession plan can help you accomplish goals for your company as well as determine when it time to move on in the future, consult with a New Jersey business succession planning attorney today.

 

Take This Business Succession Planning Quiz to Learn Whether or Not You Are Prepared for the Future

May 25, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

business succession planning NJUnfortunately, far too many individuals avoid the process of business succession planning, figuring that they will deal with it at some point in the future. Unfortunately, as many business owners can attest, there are numerous reasons why someone may need to depart a business suddenly. These include disability, death, retirement and other issues. Without having an appropriate business succession plan in place, the business may continue to struggle significantly.

Answer these questions below to learn whether or not your company is appropriately prepared for business succession planning. If you find yourself answering no to the majority of these questions, realize that you are not alone and that you could benefit from a meeting with a business succession planning attorney. Getting things organized now and initiating these processes can help your business significantly and give you a great deal of peace of mind about the future.

  • Do you already have an identified successor for all of the key roles in your business?
  • Have you defined the vision and the personal goals you have associated with transferring management and ownership of the company?
  • Are there any family issues that could impede potential ownership and leadership decisions?
  • Does your business succession plan also take into account key estate planning issues such as minimizing estate taxes?
  • Do you have appropriate liquidity in the business in order to avoid a forced sale?
  • Is there a contingency plan in case an existing business owner becomes unable to work sooner than anticipated?
  • Is a buy-sell agreement already developed for transferring assets?
  • Have you figured out yet whether or not you or any other individual is depending on the sale of the business to meet cash flow needs in retirement?
  • Have you already had a business valuation conducted and viewed your company in the same way that a potential buyer would?

If you have not engaged in this process yet, it is not too late. Consult with a business succession planning attorney to learn more.

 

Why Do You Need to Think About Small Business Succession Planning Now?

May 19, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Did you know that just over half of all small business owners are aged 50 or above? That’s according to statistics from the U.S. Small Business Administration. How that breaks down to actual numbers is that 28 million individuals who own a small business are at the point of considering transitioning out of their business.business succession planning NJ

Despite the fact that many small business owners are over age 50, a vast majority of them have not completed the business succession planning process. A whopping 78% of small business owners plan to sell their businesses in order to fund their retirements, but less than one-third of them have an actual written succession plan which could be a recipe for disaster. Individuals who are counting on the sale of the business to fund their retirement completely could find themselves shocked if they have not planned ahead properly. Individuals may be forced to settle the business before it has been properly evaluated by somebody else and it could mean selling the business for less than what it is worth. These are just a handful of the reasons why you need to consider a business succession plan now.

One of the biggest reasons to consider business succession planning now is that you should not count on any traditional plans unless you’ve had the opportunity to talk them over with your loved ones. For example, if you believe that your children are going to take over the business, you should never assume this until you’ve had the opportunity to speak with him directly.

A vast majority of small business owners plan to pass the business down through the family but if there is no one interested or talented enough to take on these key management roles, you could find yourself struggling to find an ideal partner when it is time to plan the transition the business quickly. You should have these conversations early in order to tap ideal individuals well in advance since you may need to develop some of the talent within the company, knowing in advance how you plan to pass it on can help you implement training opportunities now. There has never been a better time than now for business succession planning, both for protecting your family and your company’s future.

Who Needs to Be Involved in the Business Succession Planning Process?

April 28, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Aside from you and any key stakeholders with your company, you may also need to engage with a financial advisor, a business succession expert and a business succession planning attorney. This is because there are many different questions that can arise during the process of determining the right course for your business. shutterstock_290148488

The succession planning team should almost always include the owner’s family, the owner’s advisors, and leadership and management team. This is so that you can have questions answered quickly and determine what individuals will play specific roles in the process of transitioning the business in the future. Do not hesitate to reach out to an experienced business succession planning attorney as soon as you believe that you are prepared to complete this process.

There are numerous questions that need to be answered before you consider putting together your business succession plan and you should also conduct a review of any existing documents such as a buy-selll agreement. These documents can help to dictate what will happen in your business succession planning and give you a firm grounding for where you go from here. Consulting with an attorney and your advisors allows you to accomplish the meaningful goal of business succession planning.

What You Should Know About Family Business Succession Planning

April 22, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Unfortunately, the majority of family business leaders do not engage in the process of business succession planning. Even if they do engage in it, they might not do it properly or they wait until it’s too late to achieve maximum impact.shutterstock_321333917

The average longevity of a CEO in a non-family business is six years, but CEOs in family-owned businesses usually stay for 20 to 25 years. What follows are several tips for succession planning. It’s important to remember that succession planning can occur at numerous levels throughout the organization and it is important to think at least about the top 5 to 8 positions to put into your written succession plan. Keep these points in mind.

  • Think outside of seniority
  • Use a professional process of regular performance assessment, skill evaluations, and reviews of career history
  • Rank possible successors based on key criteria like learning agility, past work experience, past performance ratings, the ability to take risks, decision-making ability, prior leadership positions, education and problem-solving ability.
  • Prepare the next generation with comprehensive planning
  • Consider a leader outside of the family

Although this process can be difficult for any family business, it can be made much easier by consulting with a New Jersey business succession planning attorney.

 

 

Tips for Passing the Torch: Three Goals for Business Succession Planning

April 8, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

There are several different things that your company can do to make the process of business succession planning that much easier.shutterstock_4720285

Putting together your plan once is not enough as you must be able to revisit this on a regular basis and make potential changes as you see fit.  It’s much easier to craft a plan and make small changes as you go rather than having the entire company try to adapt in the event of a sudden owner departure.

Having a long term strategy will make transitions easier when a key individual does depart from the company. Follow these tips to achieve maximum success with business succession planning.

  1. Track potential successors. Use survey feedback to identify potential leaders who could serve the company in the future. Make sure you identify who has what in the form of critical competencies attributes and skills.
  2. Communicate with potential candidates. You should never promise them a position necessarily, but you can give them an idea that you are considering them for a future role. This gives them the opportunity to get the most out of training.
  3. Have an emergency plan. This should be a disciplined step by step approach for training successors quickly and immediately in the event that a business owner is no longer able to do this.

What Veteran Business Owners Should Know About Succession Planning

March 10, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Research from the Small Business Administration indicates that there are over 3.7 million small businesses owned by veterans across the country. These make up approximately 9% of U.S. companies overall. Entrepreneurs and veteran business owners certainly make important contributions to growth in the American economy as well as business creation, but they need to be aware of the challenges associated with ignoring their business succession planning.shutterstock_172218401

In a recent national study, veteran business owners indicated that they were more likely to say they were in the process of winding down their business than the general population. This could be due to the fact that the majority of veteran business owners tend to be older than individuals in the general population and therefore more likely to be thinking about retirement or other life changes that would encourage the close of a business. There are several important things you can do in this process.

  • Start planning
  • Identify your transition options
  • Prepare for a comprehensive business evaluation

Going through each of these stages can be especially helpful for protecting your interests and ensuring that you are adequately prepared for moving on from your business.

Four Critical Tips for Small Business Succession Planning

March 1, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

When you have put a lot of energy, resources and time into building your small business from the ground up, you might like to imagine that you’ll continue running it for the rest of time. Deep down, however, you understand that this is unrealistic. This is why you need to consider business succession planning now. Whether you intend to pass the business on to a family member or to sell your company, you need a succession plan. This helps to contribute to the long-term business viability. It also increases the chances that you will have sufficient funds in retirement to support you as well as to continue the business that you have fought so hard to build. The longer that you wait to conduct your succession planning the harder it will be to take action. Here are the four most important steps for getting started. shutterstock_164213294

  1. Involve your family. No matter what vision of the future you hold, you need to think about your relatives in terms of succession planning discussions. Are there any individuals already in place who may want to take over when you leave? You should also consider who is qualified to step in.
  2. Create an exit strategy in your business plan. More than likely you already have a business plan for the next couple of years. Your succession strategy and exit strategy should also be included in this plan.
  3. Put together your team of advisors. There will be several different people you need in the process of doing your business succession plan, such as an estate planning attorney, a business partner, succession planner, and an accountant. They can help guide you through the complex process of succession planning.
  4. Identify and prepare to train your successor. Once you are seriously contemplating what lies ahead for the future of your company, you will feel more inclined to help choose the right individual to take over after you leave. You need to carefully consider individuals who already have the qualities and begin to put in place a training program to prepare them for the future.

Tips for Small Business Owners Who Have Ignored Their Succession Plans

January 12, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Many small business owners know the struggle of keeping track of multiple priorities working long hours and taking risks. However, even the most successful small business owners can be tempted to drag their feet when it comes to business succession planning. Some of the most common reasons for this process being skipped over are that succession planning is seen as emotionally difficult, time consuming, complex and expensive.shutterstock_62360050

Without a business succession plan, however, you are facing a lot of risk if you do someday hope to have your company survive you or to sell it for a fair price. There is no cookie cutter process you should approach for business succession planning. The amount of time spent in this process depends on the size of the business and the particular issues involved such as whether or not family members will be taking it on. Do not wait too long to get started, however, because this could prove problematic if something happens to you and you need to exit the business suddenly, having a business succession plan in place can help to avoid the challenges with a sudden departure.

Business Succession Planning: What Are the Values at Work?

January 5, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

A business reflects its owner, and a clear plan can keep that concern on the path that was chosen. Lack of a succession plan could morph the business into something different or leave it in the hands of someone who would not reflect the founder’s intent or attitude.shutterstock_110061932

The type of plan used will depend on whether the business is to be sold or kept until death or retirement. If the business to kept and passed along, use of an outside consultant can eliminate bias in the selection of a successor and that successor could be placed in a similar business to prepare for the future.

If the business is to be sold, there are many options; an outright sale, a buy-sell arrangement for a future date, a family limited partnership, or an annuity arrangement trading your business for a guaranteed lifetime income string.

Make sure you contact a New Jersey business succession planning attorney when you have questions about charting a successful path for your company. Planning ahead can prove to help answer some difficult questions.

Business Succession Planning: Challenges of Selling the Family Business

December 8, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Selling a family business, whether it’s due to lack of succession options, estate issues or the need for liquidity can cause problems as a result of sudden liquid wealth.

Passing on the family business also carries with it needs worthy of great consideration and counsel from trusted advisors. Whether to travel, work or pursue hobbies or philanthropy, the business structure within the family operated will be gone if the business is passed on to someone else and this can be an emotional struggle.shutterstock_321333917

Planning for all life elements should be pursued as an integrated process with defined goals. Investment has to move from the business into diversified streams with clear communication with all family members as far as the consequences of the sale. An individual thinking about passing on the family business should also be aware of lifestyle creep which means increasing spending just because the funds are available to do so.

Why is Business Succession Planning an Ounce of Prevention?

November 23, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

 

A person given a one-third chance of survival in life is alerted to this fact. But in many cases a person whose business faces the same chances will prefer to deal with the matter later on down the road.shutterstock_320674358

The key in this situation is a balance between business Goals and family relationships as well as balancing emotion and logic.

In the process of conducting business succession planning you should identify the objective first. Is it to sell the business? Is it to give the business to someone? When will this take place? And who will be the key parties involved. After this initial need has been accomplished, it is time to consider the financial need. Does the retiree need business proceeds on which to live and if so, how much and how will these be paid out? And finally, key employees should be kept for the purposes of continuity and employment agreements can aid in this situation, building incentives and using non-compete agreements for structure.

Is Business Succession Planning a Question of Fairness?

November 3, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

It’s very likely that a business could turn out to be the largest asset held within a family. But fairness of how to deal with this in terms of succession planning can arise as an issue if all family members are not involved in the conversation in one way or another. Especially in the event that the business is sold, non-members could be unhappy if they feel as though their distribution is smaller. There are also challenges if full and equal distribution is made because this can place a burden on members active within the business.shutterstock_312773633

One way to handle this situation and to even the playing field is to use life insurance allowing for a gradual buy out of non-members. And this also eliminates concerns associated with managing equal distributions. One of the most important ways to handle this challenge is to sit down with all family members and discuss the potential future of the business.

A business owner could be under the impression that one or more of his children or other relatives are interested in continuing on with the business. But a conversation brings this issue front and center and gives clarity to any concerns. In addition to hosting the initial conversation about how to handle business succession planning, it’s also important for the business to be valued accurately before any distributions are made considering depreciating factors like the lack of marketability.   Contact us today to learn more about business succession planning.

Business Succession: Tying a Plan to Your Vision

October 27, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Setting a course for the future of your business involves looking well into the future. Difficulties can often act to narrow and constrict your long-term plans, and focus can easily turn to quarterly results and reactions if you are not careful. shutterstock_254049055

When thinking about the future of your business, you need to take time to zoom out from this smaller picture into the bigger one so that focus is once again concentrated on how to grow as well as the people to help accomplish these goals. A wide focus helps receive buy-in from the staff of your organization in understanding that personal decisions will influence outcomes.

Some key questions to consider during this process involve which people may be intending to retire in the next five years, what people are already in the pipeline for future development, and whether promotions would generate position gaps within your company. Putting together a business succession plan should only be done under the experience of an estate planning attorney.

Ready to plan ahead? Contact us for more information.

How an Unexpected Departure Can Impact Business Succession Planning

September 1, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

There are lessons to be learned from the sudden death of David Roth, general director of the Kentucky Opera. Unfortunately, families and business around the country suffer when an unexpected departure raises many questions about the future of a company or entity. Although it can be frustrating to realize the challenges of handling this situation too late, such an event highlights the value of business succession planning in the present for any company. shutterstock_286436105

The first step in such a process is to recognize the loss and begin the communication process as early as possible. Stakeholders should be made aware of potential outcomes of the loss of a key member of the company. Stakeholders might include employees, shareholders, or even donors depending on the structure of the organization. All relevant individuals should know that operations will continue as usual in the interim. From here, the next discussion should be about plans for moving forward and what permanent leadership might look like.

If you’re struggling with starting the conversation on succession planning, we can help get you thinking about key issues and questions to consider.

How to Start the Discussion on Succession Planning

August 25, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

In order to plan ahead for the future and reduce the possibility of problems down the line, you need to think about what you want to happen to your business. The most difficult part of this process is planning the initial conversation and avoiding any excuses or reasons to put this off. Business Succession0915

When you set aside the time to talk with relevant family members or stakeholders, do not let anyone convince you that the conversation should be pushed off or dealt with later. Once you make the commitment to think about the future of the company, stick to it.

It’s essential, though, that you do have buy-in from the people at the top of the company. Your current leaders should already be assuming key roles within the company and that they participate in the process of identifying additional talent and building the structures for the company to exchange hands in the future.

Finally, be sure to hold yourself accountable. As the figurehead, the responsibilities should trickle down to your other employees, but you must be willing to show that this is your commitment instead of just saying that it is. Outlining your goals in an official statement or your company’s strategic documents helps keep you on track with this. Ready to get started but not sure how? Contact us: info@lawesq.net.

Probing Questions for Succession Planning

August 18, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

The prospect of planning ahead for retirement and the possible sale or transfer of a business raises a lot of questions. It is important to consider not only how succession planning affects you, but also how it will affect other stakeholders in the business and any future owners. Review these questions before putting together your business succession plan:

  • Can the business be continued with family members or other employees, with power gradually being given over to them?
  • Are there any other assets in place to help fund retirement outside of the sale of the business?
  • If there are other assets in place, how could the sale of the business supplement and contribute towards those?
  • If there are no other assets in place, is the business in a position to be sold? Do the analytics of the business indicate that there may be interested buyers or positive financial forecasts?
  • If the business will be sold, would the proceeds be sufficient enough to cover your retirement for the remainder of your life? i6CvhRaSJJpF9tl0uUGXDEtGNRFU5shuxQnMJSSZ4LM

All of these questions are important and worthwhile in your approach to business succession planning. Ready to get some help with this? Contact info@lawesq.net.

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