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Now What?: Dealing With Remorse After Selling A Company

March 25, 2014

Filed under: Business Succession Planning,Entrepreneurs,Small Business Owner — Neel Shah @ 1:57 pm

Most entrepreneurs have the same idea; build their company and then sell it for big bucks.

But most owners who do that usually end up staying with the firm for a few years after the sale is consummated. What they don’t necessarily expect are the mixed feelings they have, according to an article in the New York Times.

Family Business Awards 2011-68

(Photo credit: Fuller Landau Montreal)

First, they may feel uncomfortable as a “soldier” rather than as a “general.”

Second, their strengths are often in starting up the company – making something from nothing.

Third, even if they are ready and willing to be a good soldier and carry on the work they started, they may feel uncomfortable in the new culture of the new bosses.

Fourth, they may not like the changes that are being made to their “baby.”

In many cases, the sellers find they cannot stay on as planned. Some are able to make the adjustment.

The article says owners who plan to sell their businesses but stay on should give some thought to whether that is likely to be a good idea. Basically, let the seller beware.

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Cutting the Estate Tax Burden for Private Company Owners

January 9, 2013

Filed under: Business Succession Planning,Entrepreneurs,Estate Taxes — Neel Shah @ 2:22 pm

Owners of private companies often hope that the business they have built will benefit their families in the long term. No matter whether you plan to benefit your loved ones by selling the business upon your death and providing them with the proceeds, or passing the business itself on, there are certain steps you can take now that will minimize the tax burden when your business eventually changes hands. An article in the Financial Post details some of these steps.

One of these steps is to provide for charitable donations in your will. Such donations are treated as gifts made in your last year of life, and therefore provide a credit on your final tax return. In the year of and immediately preceding your death, the charitable donation limit is 100%, rather than 75% in all other years.

There are also a multitude of trust arrangements you can set up in your will  (testamentary trusts) as a tax-effective way to transfer business assets to your families. Testamentary trusts pay income tax at graduated rates as though it were an individual. Therefore, by creating a “new taxpayer” through the trust, you may provide your family with an annual tax savings. Moreover, your spouse will not have to pay capital gains tax on assets transferred from your will to a spousal trust.

Estate Planning Tips for Female Entrepreneurs

January 3, 2013

Filed under: Business Planning,Entrepreneurs,Estate Planning — Neel Shah @ 2:52 pm

For female entrepreneurs who juggle running a business as well as a family, it is often hard to find time to create an estate plan. However, as an article in Forbes discusses, not creating or updating an estate plan may create undesirable consequences for a female entrepreneur’s family after she passes.

The article suggests that female entrepreneurs take three simple steps to avoid leaving chaos for their families and business partners. Moreover, even if the female is responsible for managing the business and household finances, it is vital for her to make sure that her spouse — if any — has a working understanding of the finances.

One key area to focus on is ensuring that your business assets travel in the right direction. While many owners would like their ownership interest in the company to pass to their business partners, the laws of intestate succession  — which dictate disposition of your assets if you die without a will — will most often pass your share to your spouse or children. One way to avoid this is to put in place a buy/sell agreement. Such agreements provide instructions for how shares will be sold or distributed if a partner dies or otherwise disposes of his shares.

It is also important to assemble and make sure that you and your family are familiar with your team of advisors, and to put mechanisms in place to protect your family assets.