The election is over, but most business owners agree that the economic uncertainty they had hoped would vanish is still with us and will remain so for the foreseeable future. So what are the implications for an owner who is interested in selling his or her business and retiring during the next 12 to 24 months?
Many owners focus on the top line of the transaction, the sale price. While it is always important to get the highest price possible for a business, that isn’t the only factor. “The most important thing is not what you sell the business for, but how much of that selling price you get to keep after taxes,” says Achim Neumann, President of A Neumann & Associates, New Jersey. “An owner who properly structures the sale transaction to minimize the tax impact is often significantly better off than one who focuses only on the selling price.”
To that end, our firm is already working with a major banking partner to assist our clients by designing deal structures that meet their objectives. “A typical client,” says Gary Herviou, Director Marketing, Central New Jersey, “has three separate uses for the proceeds from a sale: personal retirement income, charitable contributions, and providing for their children and grandchildren.” As Michael Gersten, the firm’s representative in Northern NJ and Southern NY State, points out, “With the proper deal structure, the value of proceeds available for all three purposes can be significantly enhanced.”
“There are numerous vehicles for maximizing post-tax values of deal proceeds,” says Frank Arcoleo, Director Marketing, Eastern Pennsylvania. “For example, dynasty trusts can be used to make large financial gifts to multiple generations of family members while minimizing gift or estate taxes.” Which vehicles are right for you? It depends upon your objectives. Setting up a donor advised fund, for example, can create a much larger charitable contribution than a simple gift. Each situation requires its own analysis and decisions. “But the bottom line is that using these techniques can produce the same after-tax proceeds as if you’d sold the business for 40% more,” adds Arcoleo. Bottom line, the right strategy can save you a lot of dollars and headaches.
“At A Neumann & Associates, we make sure you get the proper advice from the right professionals before executing any transactions, and we help you every step of the way,” remarks Steve Wrubleski, Director of Marketing for South NJ and Philadelphia.
Achim sums it all up, “Our unique process adds value at each stage. Valuations provide sellers with an independent appraisal of their business so that it can be priced appropriately. Our assistance during the marketing phase ensures that transactions remain confidential and that only qualified buyers are presented to our sellers so their valuable time is not wasted. We make sure that there are no surprises during due diligence and that the closing is smooth. And finally, we make sure that our clients get to keep the maximum amount of the proceeds for the purposes they intend. It’s a win-win-win situation.”
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