Category: Funding your Buy and Sell

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

 

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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.

 

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

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The Cheapest Way to Fund a Buy-Sell Agreement

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Planning, Funding your Buy and Sell, Income from your business, Inside Sale, Life Insurance, Selling Your Business

By Thomas J. Perrone, CLU, CIC

Picture this: you and your business partner built something real together. Four million dollars in value, split fifty-fifty. Then, out of nowhere, your partner passes away. His widow now owns half your company. She doesn’t want to run it. She wants her money — now.

If that thought makes your stomach drop, you’re not alone. And here’s the uncomfortable truth: having a buy-sell agreement doesn’t mean you’re actually prepared for this moment.

Your Buy-Sell Agreement Is Only Half the Plan

Most business owners think a buy-sell agreement has them covered. It names a price. It names the terms. It says, in black and white, what happens when a partner leaves — through death, disability, divorce, or simply deciding to walk away.

But an agreement is only the what. It says nothing about the how. How does the money actually move from the surviving owner’s pocket into the widow’s hands? That question is where most buy-sell arrangements quietly fail — not in a courtroom, but at the bank, when it turns out the cash simply isn’t there.

Without a funded plan, owners are usually left with one of three bad outcomes:

– A fire sale — the business gets sold fast, often to a stranger, just to raise the cash.

– A forced partnership — you end up running the company with someone who never wanted to be your partner.

– The bank calls the loans — lenders get nervous about ownership uncertainty and tighten the noose.

None of that is good. And all of it is avoidable — if you fund the agreement properly, ahead of time.

The Three Ways to Fund a Buyout

Let’s use a simple example: a $4 million business, owned 50/50, with a $2 million buyout obligation. There are three real ways to cover that number.

Option 1: Cash

The instinct for a lot of owners is to just save up. Sounds responsible enough — until you run the numbers.

If your business generates $400,000 a year in distributable profit, split evenly, that’s $200,000 per partner. To fully self-fund a $2 million buyout, you’d need to set aside your entire share of profit for ten years. No raises. No reinvestment. No growth. Just money sitting there, doing nothing, in case the worst happens.

And here’s the problem nobody wants to say out loud: what if the event happens in year two? You’re $200,000 into a $2 million obligation, and your business has spent two years running on fumes because all its profit was parked in a savings account instead of working.

Cash funding only works in one scenario: if you never actually need it. The moment you do, it’s never enough.

Option 2: Borrowing

The next instinct is to borrow — a bank loan, or a note payable to the estate over time.

On a $2 million buyout, financed over ten years at 7%, you’re looking at roughly $28,000 a month. Over the life of that loan, total interest adds up to about $800,000 — money that leaves your business permanently and goes straight to the bank.

And the interest isn’t even the biggest problem. Borrowed money comes with strings: personal guarantees, the business pledged as collateral, and payments due no matter what — recession or not, lost customers or not. On top of that, a departing partner’s estate has little reason to accept a slow note when the agreement says they’re owed full value now. Notes get renegotiated. Disputes happen. And the business you’re trying to protect ends up in court anyway.

Cash starves the business. Debt mortgages it. Which brings us to the option that actually works.

Option 3: Life Insurance

Here’s the idea, and it’s refreshingly simple. You take out a life insurance policy on your partner. The business — or a properly structured trust — owns the policy and pays the premium. When your partner passes away, the death benefit arrives tax-free, within weeks. That’s your buyout, fully funded, on the spot. No fire sale. No note. No bank involved.

For a healthy partner in his fifties, a $2 million death benefit typically costs somewhere between $20,000 and $40,000 a year in premium, depending on how it’s structured.

Now compare that to the alternatives:

| Funding Method | Cost Profile | Key Risk |

  1. Cash (self-funded) | $200K/yr of profit for 10 years | Starves the business; badly exposed if the event happens early |
  2. Borrowing | ~$28K/mo; ~$800K in total interest | Collateral, personal guarantees, payments due regardless of performance |
  3. Life Insurance (trust-owned) | ~$20K–$40K/yr premium; full coverage from day one | Requires correct ownership structure and an insurable partner |

The number that tends to get people’s attention: a trust-owned life insurance approach runs roughly 74% less expensive than the next best option. And unlike cash, the coverage is fully in place from day one — not after a decade of saving.

How to Structure the Policy

Once you’ve decided insurance is the right tool, you still have to structure it correctly. There are two standard approaches.

Cross-purchase agreement. Each partner personally owns a policy on the other. When one dies, the survivor collects the death benefit and buys the deceased partner’s shares directly. Simple, clean, and it works especially well with two partners.

Entity purchase (stock redemption). The business itself owns the policies and buys back shares from the deceased partner’s estate. This tends to be easier to administer when there are three or more partners involved.

Which one is right depends on your entity type. C-corporations can run into alternative minimum tax issues under certain structures. S-corporations raise their own questions around ownership and basis. This is exactly the kind of decision that shouldn’t come from a template you found online — the structure you choose has tax consequences that can follow your family for a generation.

The Advanced Move: Trust-Owned Insurance and Key Person Coverage

If you want to do this the smart way, there’s a more sophisticated layer worth knowing about.

Irrevocable life insurance trusts. Instead of you or the business owning the policy, a trust owns it. Why bother? Two reasons. First, it keeps the death benefit out of your taxable estate — for owners with real net worth, that can mean millions in estate tax the family never has to pay. Second, the trust controls the timing and terms of the payout, so the proceeds go out exactly as the agreement says, instead of becoming a bargaining chip.

Key person insurance. This is a different tool entirely — it protects the business, not the ownership transfer. If you’ve got a key employee who runs operations or holds your most important customer relationships, their death would hit the business hard: lost revenue, lost relationships, a scramble to replace them. Key person coverage puts cash into the business to bridge that gap. It’s not for the buyout. It’s for survival. Any business with roughly five to fifty employees should have this on the radar.

Four Mistakes That Cost Owners the Most

1. Buying term insurance that expires. Buy-sell needs are permanent — you can’t predict the year something happens. Permanent coverage is the honest answer.

2. Getting the policy ownership wrong. If the person who owns the policy isn’t the same person who owes the buyout, the death benefit can trigger a tax problem and defeat the whole plan.

3. Letting the valuation go stale. The agreement says $4 million, but the business is now worth $9 million. That’s not a plan anymore — it’s a time bomb.

4. Assuming your partner is insurable. If there’s a health issue, you want to know now, while you can still get coverage — not after it’s too late.

What to Do This Week

You don’t need to overhaul everything today. Start here:

1. Pull your buy-sell agreement and ask the honest question: is this actually funded, or does it just look funded on paper?

2. Get a life insurance illustration on your partner. Just the numbers — no commitment required.

3. Have the conversation with your partner. It’s awkward, sure. But it’s a lot less awkward than the widow, the fire sale, or the bank calling your loans.

A buy-sell agreement is only as good as its funding. Of the three options — cash, borrowing, and life insurance — insurance, especially when trust-owned, is the one that’s cheapest, fastest, and most reliable when it actually matters. Get the funding question answered now, while everyone’s calm and thinking clearly, so the only thing left to work out later is the number.

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Check This Article called “Connolly Alternatives: 

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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

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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

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Case Study: Rapid Sales Growth and Ownership

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Planning, Funding your Buy and Sell, Key People_Or Group, Strategies of growing business, Valuation, Working On Your Business

Case Example Using Term Insurance

By Thomas J. Perrone, CLU, CIC

This was a situation where the company needed protection but wasn’t ready to purchase permanent insurance, even though the situation called for it.  However, the term insurance gave them what they wanted at the time and gave them the needed protection. 

Scenario: 

 A thriving business, comprising three partners—a relationship builder, an idea generator, and a product engineer—experienced remarkable sales growth within a few years. However, a potential challenge arose regarding ownership transfer upon a partner’s death, as all partners shared familial ties. 


To mitigate this concern, a comprehensive stock redemption program was devised and funded through a term insurance policy with a premium exceeding $60,000. This strategic approach enabled the business to navigate ownership transfer complexities and ensure the continuity of its operations.

Through the years, parts of the term insurance has been converted, and the company is paying about $125,000 in insurance premium to fund their liabilities and commitment.  

The case was developed through a relationship i had with one of the owners, through an introduction.  

Lesson:  

Even though this was a start up and a young company, if I has assumed it did not have the cash flow, I would have lost out on all the great potential.  Don’t assume anything, but let your client tell you what they want and why. 

THE WHY: 

There was a past history of the one of the current partners where their family member was part of a company where the partner died.  No planning was done, so the deceased partners family became the new partners.  This was not pretty, and the business ended up in chaos.  Obviously, a motivating factor for the current owner to have a good Buy and Sell Agreement where it was funded 

If you are an advisor who is working with business owners or wants to develop a business market segment in your practice, we should talk. We offer great opportunities working with our organization and deep backup.  

Thomas J. Perrone, CLU, CIC

tperrone@necgginc.com

Buy and Sell Agreement Tutorial

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Planning, evaluations, Funding your Buy and Sell, Income from your business, Key People_Or Group, Passive Ownership, retirement, Selling Your Business, Valuation, Value drivers

By: Thomas J. Perrone, CLU,CIC

and Sell arrangements that have emerged since the Connelly case.

The tutorial delves into the rationale behind the utilization of these arrangements and elucidates their advantages.

Furthermore, a comparative analysis of the funding costs associated with different Buy and Sell Agreement structures is presented.

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An Insurance LLC

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, Inside Sale, Passive Ownership, Strategies of growing business, Uncategorized

By Thomas J. Perrone, CLU, CIC

An Insurance LLC is a limited liability company (LLC) created to own and manage one or more life insurance policies to help meet the obligations under a buy-sell agreement. The Insurance LLC is a new business entity formed under local law, separate and apart from the business or businesses that are subject to the primary buy-sell obligations.  Since the Connelly ruling, Advisors are looking for ways to provide a funding arrangement for buy and sell agreements and the Insurance LLC is another way of providing for the buy and sell arrangements.  

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Connelly – Alternative 2024 

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Company Wealth, Estate Planning, evaluations, Funding your Buy and Sell, Life Insurance Types, Selling Your Business, Valuation

Thomas J. Perrone, CLU, CIC

Connelly was a hard case to digest as most of us who have been around the planning world for an exceptionally long time. We took the consequences of funding a stock redemption agreement as very normal.  As normal as “cutting the end of the ham first.”  

We are now forced to rethink this situation after the ruling, care must be taken when arranging the Buy and Sell Agreement and funding of a company, to avoid the results we have seen in Connelly.   

Today I will bring you through a few options that advisors and business owners may consider when planning the transition of business interests.   

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tperrone@necgginc.com

Sharpening Your Planning Skills to Get Ready  

by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, evaluations, Funding your Buy and Sell, Income from your business, Inside Sale, Passive Ownership, Selling Your Business, Strategies of growing business, Valuation, Value drivers

By Thomas J. Perrone, CLU, CIC

Last month I posted a video on some of the general planning tools you have not used in the past eight years because of the Jobs Act.  That is because of the high limits on the unified estate and gift tax amount.  The high limits sheltered many estate owners and business owners from an estate tax.  With the possible change around the corner it’s time to get ready.   

This month I share how to use some of the tools discussed and why.  Enjoy the video.  

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