Category: Executive Benefits

The Most Important Document a Sole Proprietors Needs 

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Estate Planning, Executive Benefits, Funding your Buy and Sell, Inside Sale, Life Insurance Types, Working On Your Business

 

By Thomas J. Perrone, CLU,CIC NEW ENGLAND CONSULTING GROUP OF GUILFORD, INC.

It is an overlooked planning strategy. What happens to a sole proprietor’s business when they die? The business is a financial hub for the family. At death, the hub dries up. What will happen to the owner’s financial support for the family? What can be done to protect this fiscal impact? Along with the death of the business owner, there is the business’s assets, such as, equipment, receivable, inventory, and other business property. What happens to this property? Are the heirs in a position of receiving the top dollar for what is to be sold?

Most business owners spend years building their companies. They develop relationships with customers, employees, vendors, and suppliers. They create systems, build a reputation, and work hard to make the business successful.

For many owners, the goal is either to pass the business to their family or to sell it at a future value providing financial security for themselves.

But there is a problem:

What happens to the business if the owner suddenly dies, becomes disabled, retires, or simply can no longer run it?

Without a plan, the future of the business—and the financial security of the owner’s family—can become uncertain very quickly.

That is why a sole owner should consider a One-Way Buy-Sell Agreement, sometimes called a unilateral buy-sell agreement.

A Buy-Sell Agreement Isn’t Just for Businesses with Multiple Owners

Many people associate buy-sell agreements with businesses that have two or more owners. However, a 100% owner can also use a buy-sell agreement to establish what happens to the business when a triggering event occurs.

A sole owner can enter into a One-Way Buy-Sell Agreement with:

  • Children or other family members
  • A trust
  • A competitor
  • An employee or group of employees
  • Another individual or entity interested in purchasing the business

The purpose is simple:

Create a predetermined path for transferring the business and provide liquidity to the owner’s family.

Instead of leaving the family to figure out what to do with the business after the owner’s death, the agreement establishes a framework before the crisis occurs.

What Happens If the Business Is Simply Left to the Children?

Leaving a business for one’s children may sound like an obvious solution.

But ownership does not automatically mean that the children are prepared to run the company.

Some children may have the experience and desire to operate the business. Others may not.

They may not understand the industry, have the necessary management skills, or even want the responsibility of owning the company.

And if they inherit the business and decide they want to sell it, they may be forced to sell under circumstances that are not favorable to them.

The market determines the value. Competitors may recognize that the family is inexperienced and attempt to purchase the company at a significant discount.

A properly structured buy-sell agreement can provide a much more orderly alternative.

What About Leaving the Business to a Spouse?

Similar issues can arise when the business is left to a spouse.

In many cases, the spouse’s primary concern will not be running the business. It will be replacing the income and financial security that the owner provided.

That can create tremendous pressure to sell.

A spouse who suddenly finds themselves responsible for a business they have never operated may understandably want to convert the business into cash as quickly as possible.

A One-Way Buy-Sell Agreement can establish a predetermined buyer and a method for determining the value of the business.

The agreement can be funded with life insurance or, depending on the circumstances, through the future cash flow of the business.

What If a Competitor Is the Buyer?

A competitor can be an attractive buyer because it may already understand the industry and recognize the value of the company.

More importantly, a properly structured agreement can establish the price and terms in advance.

This can help protect the owner’s family from negotiating with potential buyers at a difficult and emotional time.

What If Some Children Want the Business and Others Don’t?

This is another situation that should be addressed before it becomes a problem.

Perhaps three children inherit the business; only one wants to do it.

Or one child has spent years working in the company and understands how to run it, while the other children have little or no business experience.

The agreement and the owner’s estate plan should address these differences.

The children who want to own and operate the business may have an opportunity to purchase the interests of those who do not want to participate.

Other assets can potentially be used to equalize inheritance among children.

The critical point is to make these decisions before the family is forced to put them under pressure.

Six Questions That Should Be Answered

If children or other family members will eventually own the business, the buy-sell agreement should address some fundamental questions:

  1. Who will control the business?
  1. What happens if one owner wants to sell?
  1. Can an owner sell their interest to an outsider?
  1. Does another family member have a right to refusal?
  1. How will the business be valued?
  1. What are the terms of a future purchase or sale?

These questions may seem straightforward today.

They can become extremely complicated after the owner is gone.

What Should a One-Way Buy-Sell Agreement Address?

A well-designed agreement should go beyond simply stating who can purchase the business.

  1. Future Owners Should Be Bound by the Agreement

If ownership is transferred to another person, the agreement should provide a mechanism requiring subsequent owners to become subject to its provisions.

Otherwise, the original agreement may lose much of its effectiveness over time.

  1. Establish a Valuation Process

Business value changes over time.

Rather than waiting until a triggering event occurs and then arguing about what the business is worth, the owner can establish a valuation process in advance.

One approach is to have the business valued periodically by an independent appraiser.

For example, the agreement could provide an annual or biennial valuation.

A consistent valuation process can help establish a history of the company’s value and reduce disagreements when a transaction eventually occurs.

  1. Restrict Transfers to Outsiders

The agreement can establish restrictions on transferring ownership of interest to someone outside the designated group.

It can also provide remaining owners or family members with a right to first refusal.

This can help prevent an unwanted third party from suddenly becoming an owner.

  1. Establish the Terms of a Future Transaction

Price is only one part of a business transaction.

The agreement should also establish the terms under which a future purchase may occur.

How will the purchase be paid?

Will there be installment payments?

What happens if the business does not have enough cash?

These issues should be addressed before they become problems.

  1. Identify Triggering Events

Death is not the only event that can create the need for a buy-sell agreement.

Other triggering events may include:

  • Retirement
  • Disability
  • Termination
  • Voluntary departure
  • Other circumstances that make continued ownership or management impractical

The agreement should clearly identify the events that activate its provisions.

  1. Address Funding

Having an agreement to purchase the business is one thing.

Having the money to complete the purchase is another.

The agreement should address how the purchase will be funded when a triggering event occurs.

Depending on the circumstances, funding could involve life insurance, business cash flow, financing, or other sources.

The agreement should not simply identify the buyer. It should provide a realistic mechanism for completing the transaction.

Who Should Be Concerned About a Buy-Sell Agreement?

The Business Owner

The owner has spent years building the business.

Without a plan, the future of the company can be left to chance, potentially creating confusion and disagreements among family members and other interested parties.

The Family

For many families, the business represents a sizable portion of their financial resources.

It may also represent their future source of income.

The family should know what is supposed to happen to the business and how its value will be converted into financial security.

The Owner’s Advisers

A One-Way Buy-Sell Agreement should not be viewed as a document that exists independently from the owner’s overall planning.

The owner’s attorney, CPA, insurance professional, financial adviser, and business transition or exit-planning professional may all have important roles in designing and implementing the plan.

Each adviser brings a unique perspective, and coordination among them can improve the likelihood of achieving the owner’s objectives.

The Real Reason a Sole Owner Should Have a Buy-Sell Agreement

There is one important reason for a sole owner to have a plan.

The owner knows the business better than anyone else.

The owner has developed relationships with customers, employees, vendors, suppliers, and other stakeholders that have helped make the business successful.

The owner has also developed an instinct for making the decisions necessary to keep the company moving forward.

When that owner suddenly disappears because of death, disability, or another triggering event, the business experiences a transition.

Customers may have questions.

Employees may be uncertain.

Vendors may become concerned.

Family members may not know what to do.

Potential buyers may see an opportunity to negotiate from a position of strength.

A One-Way Buy-Sell Agreement cannot eliminate every challenge associated with the loss or departure of an owner.

But it can provide something extremely valuable:

Clarity.

It can establish who will acquire the business, how the business will be valued, what the transaction terms will be, and how the owner’s family can receive the value that has been created.

For a business owner who has spent years building a valuable company, that may be one of the most important parts of the overall business transition plan.

Building a business is difficult. Protecting the value you have created should not be left to chance.

Article related:   Single appraiser buy and sell agreement

 

The Cheapest Way to fund your Buy and Sell Agreement – article- Download your free article

Let’s discuss the topic: Toms Calendar

tperrone@necgginc.com

 

THREE WAYS TO GROW YOUR BUSINESS WEALTH! 

by YOUR BUSINESS WORTH, posted in Executive Benefits, Income from your business, Inside Sale, Key People_Or Group, Passive Ownership, retirement

Business owners get confused as to the purpose of their business. They put most of their time into their business with the hope of good business growth and future security.  However, in many cases, they are not updated on the most effective way of using their cash flow to create outside wealth. There are three ways to use your business to create personal wealth and and economic future. 

Thomas J. Perrone, CLU, CIC – NEW ENGLAND CONSULTING GROUP OF GUILFORD, INC

Growing value in your business can create tremendous wealth, however, only 15-30% of the small businesses will sell, which creates the “if factor”, the unknown.  

The percentage of sales is lower for the smaller owned business, more like 15%.  

Building your business to its highest potential value is possible by having guidelines of what must be done as you grow the business.  

To hedge the “what if’s” of selling it, you can use the cash flow of the business to create other assets such as executive compensation and qualified benefits and plans.   

Many owners neglect to consider these options and end up with too much wealth in their business, causing liquidity and tax problems when they leave, die or become disabled. This presents the problem of “how do you get your wealth out of your business on a tax advantaged method” when you want to leave the business and you need it?  

Building Your Business to Sell in The Future! 

Here is a list of strategies that will help in growing a robust business and greatest potential value.  

  • Develop value drivers  
  • Create a culture- employees come to you because of it 
  • Develop a middle management 
  • Systematize your business 
  • Customer diversification  
  • Avoid being dependent on a few customers for your sales  
  • Marketing plan- and always update it and analyze it 
  • Focus on growth of revenue, lowing of costs 
  • Protect yourself from litig 
  • Make sure you protect yourself such as  
  • Fund your Buy & sell agreements, bank loans, audit your liability insurance, protective documents, etc. 
  • Have a strategy to sell or transition your business, such as growing the middle management, and key people to step in and run the company, or even buy it. This is a long-term process, but you must put things in order and work on strategies to get the greatest potential value from the business.  

When Considering Using Your Business Cash Flow to Develop Executive Compensation and Other Benefits,  

Such as:  

  • Executive Compensation plans, where the company contributes to the plan, and you as owner pay as little as 2% in taxes on the contribution.  
  • Salary Continuation and deferred compensation arrangements for you.  
  • Deposit into your company’s retirement plan (like 401k, profit sharing, 403b, etc.). However, if you are a “high earning business owner”, do not load up on 401k contributions and other contributory plans as the tax consequences are severe.  
  • Make sure your buy and sell agreements are funded and updated. Make sure they cover at least the seven major triggers (death, disability, voluntary and non-voluntary termination, divorce, bankruptcy, retirement).  
  • Have critical illness plans set up such as medical reimbursement plans, disability, and health coverage.  
  • Tie your major Key group to your company as they are the value of the company and contribute to the cash flow of your company, allowing you to implement these strategies.  
  • Create vested benefit schedules to keep them with you  
  • Have a company evaluation /appraisal periodically.  
  • Focus your attention on growing sales, as all things point to sales revenue. 

Executive Compensation Is a Fantastic Way to Extract the Value of Your Company on a Tax-favored Basis, And Not Tie It Up in Your Company, Having It Available to You When Needed. 

Download the Jfk Era Benefit Report – Free- Learn how to create maximum benefits on a tax-advantaged strategy.  This is how savvy business owners use their business cash flow to create wealth! Download

Like to discuss:  Call me.  My Calendar

www.bpbpgrp.com/Tom

check this article out – When your Income Outgrows your 401k

When Your Income Outgrows Your 401(k): The Retirement Funding Problem for High-Earning Business Owners

by YOUR BUSINESS WORTH, posted in Company Wealth, Estate Planning, Executive Benefits, Income from your business, Inside Sale, Key People_Or Group, Passive Ownership, Selling Your Business, Tax Free Income, Working On Your Business

Summary: Business owners can’t save enough for their retirement because of the cash flow demands. 401k, and profit sharing plans limit their contributions, consequently they don’t save enough for retirement and have to depend on the value of their company for their future security. Unfortunately, only a small percentage of companies sell. This creates the Gap in their retirement planning.

By Thomas J. Perrone, CLU, CIC

One of the biggest retirement planning problems facing successful business owners is not earning enough money to retire.

It is the inability to put enough money into a traditional 401(k) or other contributory retirement plan to replace the income they are accustomed to earning.

For many business owners, this problem becomes especially important during the final three to five years before retirement.

The Contribution Limitation Problem

A business owner may be earning $250,000, $300,000, $400,000, or more per year. Naturally, as retirement approaches, the owner wants to accumulate enough retirement capital to maintain a reasonable percentage of that income.

The problem is that a traditional contributory retirement plan does not necessarily allow the owner to contribute in proportion to his or her income.

The amount the owner can contribute may be affected by the plan’s design, employee participation, employee compensation, nondiscrimination requirements, and applicable contribution limits.

This creates an important question:

How do you fund the retirement needs of a highly compensated business owner when the traditional retirement plan limits how much that owner can put away?

Consider a Simple Example

Imagine a business owner earning $250,000 per year.

Now compare that owner with an employee earning $100,000 per year.

Both may participate in the same 401(k) or contributory retirement plan. Yet the business owner’s retirement income need is substantially greater.

If the owner wants to retire at a level that is reasonably close to his or her final earnings, the amount that can be accumulated through the traditional plan may not be sufficient.

The employee earning $100,000 may have a much more manageable retirement funding objective.

The owner earning $250,000 has a much larger gap to fill.

And this becomes even more significant when the owner is only a few years from retirement.

The Last Three to Five Years Can Be Critical

Many business owners spend decades building their companies.

They reinvest profits.

They purchase equipment.

They hire employees.

They expand facilities.

They build working capital.

They grow the value of the business.

As a result, much of their wealth may remain inside the business rather than inside a retirement account.

Then, three to five years before retirement, the owner begins asking:

“How am I going to turn the value I’ve created in my business into retirement income?”

That is when the limitations of a traditional contributory retirement plan can become particularly apparent.

Trying to solve a lifetime retirement accumulation problem during the final few years with a plan that has contribution limitations may simply not work.

The Real Issue May Not Be Your Retirement Plan

This is why I believe business owners need to look beyond the question:

“How much can I contribute to my 401(k)?”

The more important question may be:

“How am I going to convert the wealth I’ve created in my business into the retirement income I want?”

Those are two very different questions.

A 401(k) is an important retirement planning tool. But for a successful business owner, it may be only one piece of the overall strategy.

The business itself may represent the owner’s largest asset.

The challenge is developing a coordinated strategy for:

  • Building business value
  • Protecting business value
  • Accumulating retirement assets
  • Creating additional sources of retirement capital
  • Reducing unnecessary taxes
  • Preparing the business for transition
  • Converting business equity into personal wealth

Don’t Wait Until Retirement Is Five Years Away

The earlier this issue is addressed, the more alternatives may be available.

If you are a business owner earning substantially more than your employees, don’t assume that maximizing your 401(k) contribution automatically means you have maximized your retirement planning.

Your business may be producing significant income today while simultaneously creating a retirement funding gap for tomorrow.

Most business owners don’t have a retirement savings problem. They have a business planning problem.

The goal should not simply be to put as much money as possible into a qualified retirement plan.

The goal should be to develop a coordinated strategy that allows you to grow, protect, and eventually transition the value of your business into the financial resources you will need after you stop working.

That requires looking at the entire picture—not just the retirement plan.

The Bottom Line

If you are a highly compensated business owner, especially one earning $250,000 or more, take a close look at the relationship between your current income, your retirement income goal, your retirement assets, and the value of your business.

If there is a significant gap, don’t wait until the final few years to discover it.

Your business may be your greatest retirement asset—but only if you have a plan for turning its value into personal wealth.

DOWNLOAD YOUR FREE “JFK ERA BENEFITS REPORT FOR BUSINESS OWNERS” and learn how high earning business owners are creating tax advantaged retirement plans.

CLICK HERE

Video:  Endorsement RETIREMENT PLAN

If you have an interest in discussing your planning please call.

Tom’s Calendar

The Insurance-Holding LLC: A Smarter Way to Fund Your Buy-Sell Agreement

by YOUR BUSINESS WORTH, posted in Buy and Sell Agreements, Estate Costs, Estate Planning, Funding your Buy and Sell, Key People_Or Group, Life Insurance, Life Insurance Types, Selling Your Business, Strategies of growing business, Uncategorized, Valuation, Working On Your Business

 

By Thomas J. Perrone, CLU, CIC

Every multi-owner business eventually asks the same uncomfortable question: what happens if one of us dies, becomes disabled, or wants out? A buy-sell agreement answers the “what” — it’s the legal contract that says the remaining owners (or the business) will buy out a departing owner’s interest. But a buy-sell agreement is only as good as its funding mechanism. Promises to pay are worthless if the cash isn’t there when it’s needed.

Life insurance is the most common way to fund a buy-sell agreement, because it delivers cash exactly when it’s needed most — at death. The harder question is *who should own the policies*. For businesses with more than two or three owners, a growing number of advisors are turning to a special-purpose LLC created solely to hold those policies. Here’s how it works, and why it might be the cleanest solution on the table.

The Problem With the Traditional Options

There are two classic ways to structure buy-sell funding:

Cross-purchase agreements** have each owner personally buy a policy on every other owner. This works fine with two owners (two policies), but the math explodes quickly. Four owners need twelve policies. Six owners need thirty. Every time an owner joins or leaves, policies have to be rewritten. It’s an administrative nightmare, and it often means owners of different ages and health statuses paying wildly different premiums for equal buyout rights.

Entity-purchase (redemption) agreements** solve the multiple-policy problem — the company itself owns one policy per owner — but they create a different issue: when the company redeems a deceased owner’s shares, the surviving owners don’t get a step-up in the cost basis of their own interests. That can mean a much bigger capital gains tax bill down the road when they eventually sell

The LLC Solution

An insurance-holding LLC splits the difference. The owners form a separate LLC — sometimes called a “special-purpose entity” or “insurance LLC” — whose only job is to own and administer life insurance policies on each business owner. The LLC is typically structured as a partnership for tax purposes, with each business owner holding a membership interest proportional to their stake in the operating company.

Here’s the flow:

– The LLC purchases one policy on each owner’s life (not one per pairing, so the policy count stays low no matter how many owners there are).

– Each owner (or the operating business) contributes cash to the LLC to cover premiums.

– When an owner dies, the LLC receives the death benefit tax-free.

– The LLC uses those proceeds to purchase the deceased owner’s interest in the operating business, distributing it to the surviving members according to the buy-sell terms.

Because the LLC — not the individual owners — is treated as the policy owner and beneficiary, and because it’s taxed as a partnership, the surviving owners generally receive a basis step-up in their LLC interests similar to what a cross-purchase arrangement provides, while avoiding the multiple-policy headache of a true cross-purchase.

Why Owners Like It

–Fewer policies, less administration. One policy per owner, held in a single entity, instead of a tangle of cross-owned contracts.

– Basis step-up preserved. Surviving owners’ tax basis generally increases, which can meaningfully reduce future capital gains taxes.

– Avoids the transfer-for-value trap. Because all owners are members of the same LLC from the outset, properly structured transfers among them typically fall within IRS exceptions that keep the death benefit income-tax-free.

– Built-in flexibility. New owners can be added as LLC members without rewriting a web of cross-purchase contracts.

– Creditor separation. Holding policies in a distinct entity can offer a layer of separation from the operating company’s business risks.

What to Watch Out For

This structure isn’t a free lunch. It adds a second legal entity to maintain — its own operating agreement, its own tax filings, its own bank account for premium payments. The IRS has scrutinized partnership-owned life insurance arrangements in the past, so the LLC operating agreement needs to be drafted carefully, with real economic substance and clear treatment of premium contributions as capital contributions rather than disguised gifts. It also requires everyone to stay disciplined about funding premiums on time, since a lapsed policy defeats the entire purpose of the plan.

Is It Right for Your Business?

The insurance-holding LLC tends to make the most sense once you have three or more owners, where cross-purchase becomes unwieldy but the tax advantages over a straight entity redemption still matter. For two-owner businesses, a simple cross-purchase or entity-purchase plan may be all you need.

As with any buy-sell funding decision, this isn’t something to set up from a blog post. Work with a business attorney and a tax advisor who can model the specific numbers for your ownership structure, confirm the entity is respected for tax purposes, and make sure the policies, the operating agreement, and the buy-sell agreement itself are all pulling in the same direction. Get it right once, and it’s one less thing your partners have to worry about when the unexpected happens.

This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Consult a qualified attorney and tax professional before implementing any buy-sell funding strategy.

 

Discussion: :My Calendar

Website: www.bpbpgrp.com/tom

203.530.6615

tperrone@necgginc.com

Check out this : Cheapest Way To Fund Your Buy and Sell Agreement

FREE DOWNLOAD CLICK HERE: THE BSA GUIDE

 

What Buyers Really Look For When They Buy a Business

by YOUR BUSINESS WORTH, posted in Buy and Sell Agreements, Company Wealth, Estate Costs, Funding your Buy and Sell, Income from your business, Key People_Or Group, Life Insurance, Life Insurance Types, Transfer Costs, Value drivers, Working On Your Business

 What Buyers Really Look For When They Buy a Business

It’s Not Just About Profits—It’s About Confidence

By Thomas J. Perrone, CLU,CIC

Many business owners assume that if their company is profitable, buyers will line up and pay top dollar when it’s time to sell. Unfortunately, that’s rarely how the market works AND how a transition of their business happens. Professional buyers don’t simply buy earnings—they buy certainty when purchasing a business. They want confidence that the business will continue to produce predictable profits after the current owner walks away. The less risk they see, the more they’re willing to pay. Whether you plan to sell in three years or twenty, understanding what buyers value today gives you the opportunity to dramatically increase the value of your business before you ever put it on the market.

Buyers Want Predictable Cash Flow The first question every serious buyer asks is simple: Will this business continue generating cash flow after the owner leaves? Businesses with recurring customers, consistent profitability, stable margins, reliable financial reporting, and strong cash flow command significantly higher valuations because they reduce uncertainty. The more predictable your financial performance, the more valuable your company becomes.

Buyers Want a Business—Not a Job One of the biggest reasons businesses receive lower offers is owner dependence. If every important decision requires you… If customers only trust you… If employees rely on you… If sales stop when you stop… Then buyers aren’t purchasing a business. They’re purchasing your job. The more independent your company becomes, the more attractive it becomes to buyers.

Strong Financial Records Build Trust Professional buyers expect financial statements they can rely on. They look for:

  • Accurate financial statements
  •  Clean tax returns
  •  Monthly reporting
  •  Normalized earnings
  • Organized documentation

Disorganized books create doubt, and doubt always lowers value. Great Leadership Creates Premium Value Businesses with strong leadership teams consistently receive higher purchase offers.  Why? Because buyers know the company can continue operating successfully without the owner being involved in every decision. Companies with defined responsibilities, accountability, low employee turnover, and future leaders already in place are viewed as lower-risk investments.  

Systems Are More Valuable Than Heroics Many successful businesses rely on talented people. Exceptional businesses rely on systems. Documented procedures, operating manuals, training programs, technology, and standardized processes allow a company to produce consistent results regardless of who is running the day-to-day operations. People eventually leave.  Systems remain.

Diversification Reduces Risk Imagine one customer accounts for 40% of your revenue. A buyer immediately sees risk. The same concern exists if your company depends on one salesperson, one supplier, or one product. Diversifying your customer base and revenue sources creates stability—and stability increases business value.

Buyers Purchase Future Growth Buyers aren’t just investing in today’s profits. They’re investing in tomorrow’s opportunities. They want to know:

  •  Can revenue increase?
  •  Can margins improve?
  •  Are new products possible?
  • Can technology improve efficiency?
  • Can the business expand into new markets?

Often, future growth potential is worth more than current earnings.

Eliminate Deal Killers Before Buyers Find Them Unexpected problems can quickly reduce purchase price—or stop a transaction entirely.

  • Common deal killers include:
  • Pending legal issues
  •  Poor contracts
  •  Tax problems
  •  Environmental concerns
  •  Employee disputes

The fewer surprises buyers uncover during due diligence, the smoother and more profitable the transaction becomes.

The Most Valuable Businesses Are Transferable Ultimately, buyers ask one question: **”Can I step into this business and continue operating successfully?”** If the answer is yes, buyers compete. If the answer is no, they negotiate. Transferability is one of the greatest drivers of business value. ## The Best Time to Prepare Is Years Before You Sell Increasing the value of your business isn’t something you accomplish six months before retirement. The most successful exits are planned years in advance.

Owners who prepare early enjoy:

  • Higher business valuations
  •  More negotiating leverage
  •  Greater financial security
  •  More retirement options
  •  Less stress during the sale process

How the GWT System Helps Business Owners Increase Business Value The GWT System was designed to help business owners move beyond simply operating their company to building a business that creates long-term wealth. By focusing on enterprise value, executive compensation strategies, retirement planning, succession planning, and owner independence, business owners can strengthen both their company and their personal financial future. The goal isn’t simply selling your business.  The goal is creating financial freedom.

Ready to Find Out How Valuable Your Business Really Is? If you’d like to learn how prepared your business is for a future sale—or discover the areas that could significantly increase its value—schedule a confidential conversation today. Thomas J. Perrone, CLU, CIC, New England Consulting Group of Guilford, Inc. **Building and Protecting Your Business Worth**,Helping business owners build wealth, increase enterprise value, and retire with confidence.

VIEWPOINT: To plan for the future you need to know where you are currently in your planning, This short 4 minute survey is enough information for us to complete and send you a report called the “Where You Are Report”.  This will help you plan for your future.   To take the survey CLICK HERE

ALSO, get your “Business Essentials Guide”, a quick reference guide to business planning: Click Here CALENDAR FOR CONFERENCE CALL:  Click Here  

Your Best Employee Is Being Recruited Right Now — And You May Not Even Know It.

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Costs, Estate Planning, evaluations, Executive Benefits, Key People_Or Group, Passive Ownership, Selling Your Business

BY: Thomas J. Perrone, CLU, CIC

Employee retention strategies are important and losing a key person isn’t just an inconvenience. When you factor in recruiting, training, lost relationships, and lost revenue, it can cost well into six figures. So, what’s the solution?

Phantom equity or ghost stock! A great tax strategy!

In this video, I break down exactly how phantom equity (also called phantom stock or ghost stock) works — and why it may be the most powerful retention tool available to closely held business owners today.

This video explains the “Phantom Stock Golden Handcuff” plan, a strategy for businesses to retain top talent without giving up equity. Learn how this plan, which involves a written agreement where key employees receive “phantom” shares, can significantly boost staff retention. We detail how the plan works, its benefitsas an employee benefits package, and its tax treatment within human resources strategies.

✅ What you’ll learn:

  • What phantom equity actually is — and what it isn’t
  • How hypothetical shares are granted, valued, and paid out in cash
  • Full Value vs. Appreciation Only — which design is right for your situation
  • How taxation works at distribution — for you AND your key employee
  • How to informally fund the obligation using tax-efficient financial instruments
  • Why this tool protects your ownership, preserves your control, and is.   fully deductible

No ownership given up. No ERISA compliance headaches. No complicated legal structure. Just a simple, flexible, written agreement that aligns your key person’s financial future with the growth of your business.

If you’re a business owner with 5 to 50 employees and you rely on key people

to drive your success — this video is for you.

📩 Questions about your specific situation? Email me directly: tperrone@necgginc.com

📞 Call: 203-530-6615

📞Or better yet, I would love to have a meaningful conversation with you of what you are thinking concerning your employees.

 Feel free to schedule a spot in my calendar;  https://fantastical.app/b5bhcvxwev-lPTY/call-meetings-general   

👍 If this was helpful, please like and subscribe. I publish new content regularly to help business owners build, protect, and transfer wealth —

https://youtu.be/kVXel27bAEc?si=vzy2R0siYfBvNcXH

Life Insurance and Estate Costs: A Smarter Way to Create Liquidity

by YOUR BUSINESS WORTH, posted in Estate Costs, Estate Planning, Executive Benefits, Life Insurance, Life Insurance Types, One Big Beautiful Bill, retirement, Selling Your Business, Tax Efficient, Tax Free Income, Transfer Costs

Why pre-planning with properly structured coverage can help families avoid forced sales, costly borrowing, and value destruction when taxes come due.

By Thomas J. Perrone, CLU, CIC

If most of your wealth is tied up in real estate, a family business, or long-term investments, your estate can be “asset-rich but cash-poor.” The challenge is that estate taxes and transfer costs can come due quickly—often before heirs have time to sell assets thoughtfully or arrange financing

The overlooked question in estate planning

For many business owners and high-net-worth families, estate planning focuses on what will be transferred and to whom. Just as important is the practical question that determines whether a plan works in real life: Where will the cash come from to pay estate taxes and other transfer costs—on time?

The issue is rarely a lack of wealth. It’s a lack of liquidity—and a very real deadline.

One of the most effective ways to solve this problem is also one of the most misunderstood: using life insurance to fund estate taxes and transfer expenses efficiently, without forcing the sale of long-term assets.

The real problem: a deadline and a liquidity crunch

Estate taxes and transfer costs are not optional—and they don’t wait. In many cases, they must be paid within nine months of death.

That timeline can create a liquidity crunch when a large share of an estate is tied up in:

  • Real estate
  • Privately held businesses
  • Illiquid investments

When the calendar and the balance sheet don’t line up, families can be pushed into expensive decisions at exactly the wrong time.

Four ways estates typically cover the bill

Most estates end up using one (or a combination) of the following approaches to cover taxes and transfer costs.

1) Cash on hand

It’s simple—but it can be inefficient. Holding large amounts of cash can mean giving up long-term growth and flexibility. For many families, keeping millions in low-yield accounts “just in case” isn’t realistic.

2) Forced sale of assets

When liquidity isn’t available, families may have to sell assets quickly to meet the nine-month deadline.

Imagine being forced to sell:

  • A commercial property
  • A family business
  • Land or long-held investments

…all on a tight timeline.

That can lead to a fire sale—assets sold below market value—eroding wealth that may have taken decades to build.

3) Financing the tax bill

Another option is borrowing money to pay the estate taxes.

Borrowing can preserve assets, but it introduces new risks and costs, including:

  • Interest costs
  • Long-term debt obligations
  • Uncertainty around loan approval

Financing may preserve assets, but interest and repayment terms can drive the total cost well beyond the tax liability. And credit availability can tighten at exactly the wrong time.

4) Life insurance (a strategic liquidity solution)

This is where planning changes everything.

When life insurance is owned by a properly structured trust, it can create liquidity exactly when it’s needed—without disrupting the investment portfolio, the business, or the family’s long-term plan.

A real-world example

Consider this scenario:

  • Age: 59
  • Net worth: $15.5 million
  • Projected estate value: $46 million

The estimated tax bill: $18.6 million due within nine months.

Now compare the cost of each strategy:

  • Cash: forfeits future earning potential on the dollars held back
  • Forced sale: can exceed $20 million when assets must be sold at a discount
  • Financing: approximately $23 million over time, depending on rates and terms
  • Life insurance: about $4.8 million in total cost in this example

That’s roughly 74% less expensive than the next best option.

Why life insurance often comes out ahead

Life insurance stands out for several key reasons:

Cost efficiency

Properly designed coverage can provide required liquidity at a fraction of the cost of holding idle cash, selling assets under pressure, or borrowing.

Tax advantages

  • Death benefits are generally income tax-free
  • Can be structured outside the taxable estate

Predictability

Unlike market-based holdings, a policy’s death benefit is designed to be available on a known event, with no market-timing risk.

  • No volatility
  • No timing risk
  • Guaranteed payout when needed

Potentially strong effective returns

Depending on age, underwriting, and product design, the internal rate of return on a death benefit can be attractive (often cited at 10%+ in illustrations), with a potentially higher tax-equivalent return depending on your bracket.

The power of pre-planning

One of the most important insights is this:

Life insurance isn’t just an expense—it can be a pre-funded liquidity solution.

With current tax laws, individuals may have the ability to:

  • Gift funds into a trust
  • Avoid gift taxes within certain limits
  • Systematically fund a future tax obligation

This transforms a reactive problem into a proactive strategy.

Final thoughts

Estate planning isn’t just about transferring wealth—it’s about preserving it.

Without proper planning, families may be forced into:

  • Selling valuable assets
  • Taking on debt
  • Losing a significant portion of their legacy

Life insurance offers a smarter alternative:

  • Lower cost
  • Greater certainty
  • Minimal disruption to your estate

Bottom line

If you expect your estate to face taxes or transfer costs, the real question isn’t if you’ll pay—it’s how.

And as the numbers clearly show:

For many families, life insurance is often the most efficient way to do it.

Work with your estate planning attorney, CPA, and insurance advisor to model the expected estate tax exposure, test different liquidity strategies, and determine whether a trust-owned policy fits your objectives and timeline.

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Download your free report:  The Big Beautiful Bill Tax Change Guide – this guide will help you understand all the opportunities this tax bill has offered to business owners.

www.bpbpgrp.com

tperrone@necgginc.com

 

Four Pillars of a Strong Business: Growth, Protection, Transition, Equity

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Executive Benefits, Income from your business, Key People_Or Group, Selling Your Business, Strategies of growing business, Working On Your Business

Are You Building Your Business by Design… or by Luck?

By Thomas J. Perrone, CLU, CIC

Most small business owners don’t start their journey with a lack of ambition. They work hard, grow steadily, and pour everything into their company. But at some point, an uncomfortable question surfaces:

Is my business growth intentional… or is it just happening?

If you’re like many owners, you’re fully absorbed in the daily demands of running your business. And while revenue may be increasing, key areas—financial planning, protection strategies, and long-term transition—often go overlooked.

That’s where risk quietly builds.

The Hidden Gaps in Growing Businesses

Many business owners are aware—sometimes painfully aware—that critical elements are being neglected. Not because they don’t care, but because they simply don’t have the time, clarity, or structure to address them.

These gaps often include:

  • No clear long-term growth strategy
  • Limited protection against unexpected events
  • Inefficient tax planning
  • No defined exit or succession plan
  • Uncertainty about how to turn business success into personal financial security

Without addressing these, even a successful business can become fragile.

The Questions Every Business Owner Should Ask

Take a moment to consider:

  • Do you have a clear, fail-safe plan to grow, protect, and eventually transition your business?
  • If you had to step away tomorrow—due to retirement, disability, or worse—what would happen?
  • Could you extract your business value in the most tax-efficient way possible?
  • Are you maximizing your compensation and benefits through your business?
  • Do you have a plan for the unexpected—economic downturns, key employee loss, or sudden life events?

If any of these questions are difficult to answer, you’re not alone—but it’s a sign that planning is overdue.

From Uncertainty to a “Destiny Plan”

What many business owners need isn’t more complexity—it’s clarity.

A structured approach—often referred to as a “Destiny Plan”—focuses on aligning your business with your ideal life and financial future. It brings together the key elements that drive long-term success and security into one cohesive strategy.

At its core, this approach focuses on four essential pillars:

1. Growth: Building with Purpose

Growth should be intentional, not accidental. That means:

  • Implementing systems that scale
  • Developing strong leadership and teams
  • Focusing on the true drivers of business value

 

2. Protection: Preparing for the “What Ifs”

Every business faces risk. The question is whether you’re prepared.

  • What if a key employee leaves?
  • What if cash flow tightens?
  • What if you can’t continue running the business?

Proper protection planning ensures your business can withstand the unexpected.

 

3. Equity: Turning Success into Wealth

Your business is likely your largest asset—but are you leveraging it effectively?

  • Accessing equity without unnecessary tax burdens
  • Structuring compensation to maximize benefits
  • Building wealth both inside and outside the business

The goal is not just to grow a business—but to create real, usable wealth.

 

4. Transition: Planning Your Exit Before You Need It

Every business owner will eventually leave their business. The only question is how.

  • Will it be on your terms?
  • Will you receive full value?
  • Is your family or team prepared?

A well-designed transition plan ensures you can exit smoothly, efficiently, and profitably—whether that’s through sale, succession, or retirement.

 

A Simple First Step

You don’t need to solve everything today—but you do need to start.

Even a quick self-assessment can reveal where your biggest opportunities lie. Small adjustments in the right areas can lead to significant improvements in both business performance and personal financial outcomes.

Final Thought

Your business should serve your life—not the other way around.

With the right planning, you can move from uncertainty to clarity… from reactive decisions to intentional strategy… and from building a business to building a legacy.

The question is:

Are you ready to start designing your future—on purpose?

Free download report:

Where you are, and where you could be!

https://www.allclients.com/Form3.aspx?Key=E29266E845E39AFF52FA8CF13E04A8F9

tperrone@necgginc.com

 

One Big Beautiful Bill

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Planning, evaluations, Executive Benefits, Funding your Buy and Sell, Selling Your Business, Strategies of growing business, Tax Efficient, Tax Free Income

By Thomas J. Perrone, CLU, CIC

This video will give you a good idea of the “One Big Beautiful Bill”, and the strategies that can be employed for the long-term planning

The Trump Administration made life much easier in preserving legacy  for everyone.

If you wish to discuss any of this with me, please use my calendar link

Overview of the BBB and Planning Options and Strategies!

For Advisors and For Business Owners to Utilize. 

Tom covers some of the major areas of the bill, emphasizing income tax reduction and estate exclusion and estate shifting.  He urges estate owners to do planning now  and avoid delaying because although the BBB is now law, it can be changed by congress in the future.  Use it while you have it!

 

https://youtu.be/OgkPRr3JrDE?si=ajHUjvb5fi_hf9xZ

 

For overview of the BBB, click for a download

https://www.allclients.com/Form3.aspx?Key=78B769D475F542B7E20799CD205B9205

tperrone@necgginc.com

Strategies for Making Your Taxable Retirement Plan – Tax-Free

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Company Wealth, Estate Planning, Executive Benefits, Key People_Or Group, retirement, Tax Efficient, Tax Free Income

By Thomas J. Perrone, CLU, CIC 

Retirement plans such as 401(k), IRA, 403(b), Cash Balance, Profit Sharing, and other qualified plans are popular choices for securing one’s future. While these plans focus on accumulation and stock market returns, which can be quite exciting, there are significant drawbacks associated with them.

Although retirement plans offer the appeal of disciplined savings and the potential for growth over time, they also come with inherent risks that are often overlooked. These plans, designed to assist participants, can sometimes result in financial shortfalls or unforeseen tax liabilities. The unpredictability of market performance and regulatory constraints may cause participants to question the adequacy and reliability of such strategies. Addressing these concerns proactively is essential for ensuring a smoother retirement journey and providing stronger security for loved ones.

Life insurance can help mitigate these downsides. However, there are several critical discussions that are seldom addressed when dealing with qualified retirement plans:

  • Future taxation: 100% of the funds are taxed upon withdrawal.
  • Death, disability, or termination of the plan: These events can significantly affect the ultimate outcomes for the family. For instance, if the participant dies five years into the plan, the family may not receive the anticipated benefits.
  • Sufficiency: Will the plan provide 60-75% of your final earnings?
  • Contribution limits: Participants may struggle to contribute enough to create the principal needed to achieve the desired percentage, particularly highly compensated employees.

These issues can be addressed effectively by incorporating life insurance into the retirement strategy.

The accompanying video explores some of the most pressing questions regarding retirement plans.

Learn about the JFK ERA benefit plan used for high earners, a plan that will create tax-free benefits with very few restrictions. This is a plan every Business Owner should know about.

Get your FREE REPORT– CLICK THE LINK BELOW

https://www.allclients.com/Form3.aspx?Key=277641709EAD8CD47ED41034FB533AB4

Thomas J. Perrone, CLU, CIC

tperrone@necgginc.com