Category: Uncategorized

THREE WAYS TO GROW YOUR BUSINESS WEALTH! 

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, Income from your business, Inside Sale, Key People_Or Group, Passive Ownership, retirement, Selling Your Business, Strategies of growing business, Tax Efficient, Tax Free Income, Uncategorized

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. 

There are but a few thoughts concerning building wealth through your business while building your business.  

If you would like to receive my report on the “JFK ERA BENEFITS THAT CREATED SUBSTANTIAL WEALTH FOR BUSINESS OWNER”, CLICK THE link and it will download. This benefit was around in the 50’s, but only for the bigger companies, now it is available to the smallest of businesses, and may be one of the greatest business owner benefits available.  CLICK JFK 

State Drawn Will in Common Law States

by YOUR BUSINESS WORTH, posted in Uncategorized

Thomas J. Perrone, CLU

New England Consulting Group of Guilford, Inc.

Last Will of Paul Procrastinator

First: I direct the Probate Judge to appoint anyone of his

choosing to administer all property in my name and

distribute it under the terms of this will.

Second: I direct that all of my assets be converted to cash,

all of my debts paid, including taxes, probate fees,

administrative fees, and attorney’s fee.

Third: I direct that one-half (if I am survived by one child) or one-third (if I am survived by two

or more children) of my separate property, be paid to my spouse.

Fourth: I direct that the balance of my estate be distributed outright, and in cash, in equal

shares to my children.  If any child be a minor, I direct that his share be held by a guardian for

his benefit.  The guardian may be anyone of the court’s choosing.

Fifth:When each of my minor children attains age 18, I direct that his share be then paid to

him outright, regardless of his financial or emotional maturity.

Sixth: In the event that my spouse does not survive me, I direct that his/her share be added to

the children’s shares created under Articles Fourth and Fifth

Seventh:If none of my children survive me but my spouse does, I direct that the remainder

under Article Third be distributed outright in the following manner:

●One-half of my separate property to my spouse.

●The balance to my parents, if living, otherwise to my brothers and sisters or their heirs.

Eighth:If I am not survived by my spouse, children or parents, I direct the Probate Court to

seek out my closest blood relatives and divide my estate among them in a way which gives an

equal share to my closest relatives or their descendants.

Ninth:If no relatives are located, I direct that all of my property go to the State.

Learn about the GWT planning system to help you organize you estate and business.              Click Here TO VIEW THE VIDEO.

Why You Need a Business Valuation!

by YOUR BUSINESS WORTH, posted in Uncategorized

By: Thomas J. Perrone, CLU, CIC

A business appraisal is a process of determining the economic value of a business, giving owners an objective estimate of the value of their company ³. It is typically done when an owner is looking to sell all or a part of their business, or merge with another company. Other reasons include if you need debt or equity to expand your business if you need a more thorough tax analysis or if you plan to add shareholders ³. 

If you are a business owner, you may need a business appraisal for various reasons such as:

  1. Selling your business: A business appraisal can help you determine the fair market value of your business and help you set a realistic asking price ³.
  2. Mergers and acquisitions: A business appraisal can help you determine the value of the business you are acquiring or merging with ⁴.
  3. Estate planning: A business appraisal can help you determine the value of your business for estate planning purposes ⁴.
  4. Tax purposes* A business appraisal can help you determine the value of your business for tax purposes ⁴.
  5. Litigation: A business appraisal can help you determine the value of your business in case of a legal dispute ⁴.

If you are looking for a professional appraiser to assess your business’s fair market value, you can consider contacting P C Appraisal Services located in Branford, CT ². They specialize in residential and commercial real estate property appraisals and have a 5-star rating on their website ².

Source: Conversation with Bing, 1/2/2024

(1) How to Do a Business Valuation – U.S. Chamber of Commerce. https://www.uschamber.com/co/run/finance/business-valuation-how-to-guide.

(2) What is a Business Appraisal and When a Small Business … – BizBuySell. https://www.bizbuysell.com/learning-center/article/what-is-business-appraisal/.

(3) P C Appraisal Services. https://www.pcappraisal.org/home.

(4) . https://bing.com/search?q=business+appraisal.

(5) What is a Business Appraisal – Website Closers. https://www.websiteclosers.com/resources/what-is-a-business-appraisal.

(6) Business Appraisals: What Are They? – The Balance. https://www.thebalancemoney.com/what-is-an-appraiser-how-does-an-appraisal-work-398126.

For  a Free Business Valuation Guide, CLICK THE LINK.  Your report will download immediately! 

THOMAS J. PERRONE, CLU, CIC

tperrone@necgginc.com

Creating A Final Pay Relative to Earnings!

by YOUR BUSINESS WORTH, posted in Uncategorized

BY: Thomas J. Perrone, CLU, CIC

One of the biggest problems with high earning business owners is the limitation on the amount of contributions they can make towards the 401k or other contributory plans. The limitation is driven by the makeup of the employee group and the comp 

The problem is trying to fund their final earnings of the last 3-5 years with a contributory plan where there are limitations to the number of contributions they can make.  

For example, a business owner currently earning $250,000 versus an employee earning $100,000.  

When you compare the same situation with an employee who is earning $100,000 a year you can see the inequities in the level of funding of a retirement plan and the final earnings. 

Because the high earning owner (HEO) is limited, they can’t use the contributory plan to fund a sizable percentage of their retirement. Consequently, executive compensation programs are needed to make of a good part of the difference in final pay.  

The video discusses one of the ways to make up the difference for the HEO. 

Endorsement CEEP 

A Blended Family, S Corp, And Marital Deduction! What do they have in common!

Featured by YOUR BUSINESS WORTH, posted in Uncategorized

It’s very common to find this combination of family dynamics frequently! Blended families make up a good part of our family structure and like all families, they need planning.

However, in this type of situation, the final distribution of assets is not necessarily uniform. Each parent wants to treat their children differently in most cases, however, many times both spouses are on the same page in protecting each other.

In this short video I cover some of the planning objectives when you combine the blended family along with an S Corp ownership, and the goal or retaining a marital deduction.

When Running Your Business Gets in The Way of Your Retirement!

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Buy and Sell Agreements, Estate Planning, Income from your business, retirement, Selling Your Business, Uncategorized

Many small business owners are focused on running a business that they neglect to plan for their retirement when they retire.   

In many cases they put too much wealth in their business and have a hard time getting it out when they retire. 

Too much wealth is tied in most business owners business. When the time comes that they need it, it becomes difficult to turn into a liquid asset quickly.

This report will help you understand the options that small business owners have and why they need to pay attention to the details of retirement.

Download this free report on how to build your retirement plan for the future. 

Buy And Sell Agreements and The Use of an LLC! 

Featured by YOUR BUSINESS WORTH, posted in Uncategorized

By Thomas J. Perrone, CLU, CIC 

A much-overlooked area of planning for small business owners is their buy and sell planning.  A business is fluid and forever changes its financial position. In many cases industry changes and markets affect the value of the company.  Because of the ongoing changes in business value and growth pattern, the buy and sell agreement should be reviewed more than periodically. I suggest the professionals and parties to the agreement review the value and the elements of the buy and sell, yearly.  There are two parts of the review. 

  1. The agreement should be reviewed for the “triggers” which will set in motion the BSA.  There are many BSA that have been executed which only deal with the death, disability, and retirement of the owners.  Some other triggers would be bankruptcy, divorce, non-voluntary termination, voluntary termination.   

The Funding:   

This area strives to make sure the parties are sufficiently liquid when needed to fulfill the obligation of purchasing the ownership value.  

Cross purchase: Members buy and own life insurance on other members.  For example, if you had four owners, twelve policies would be in force (3×4).   

Endorsement: The Company purchases and owns life insurance on the parties to the agreement. At their death, the company receives the proceeds and purchases the value from the deceased’s estate.  

The endorsement method is simple, as the company will purchase life insurance on the party to the agreement.  For example, if there are only four owners, the company will purchase life insurance on each of them, or four policies.  Upon the purchase of the decedent’s equity, the surviving owners will not have an increase in business cost basis.  

Using the LLC 

The LLC is set up to purchase life insurance policies on each owner.  Upon their death, the LLC collects the proceeds and purchases the ownership for the surviving owners.  

There is no “transfer for value,” as partnerships are an exemption for the transfer of value.  The remaining owners have a cost basis increase.  

This short video discusses buy and sell in more detail.  

BUY AND SELL MISTAKES FUNDING 

If you would like our comprehensive business planning guide, click the link and the report will download immediately.  

GET YOUR BUSINESS KIT  

Get Your Business Kit – Click to download

The Costly KNEE JERK FINANCIAL SUGGESTION!

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Company Wealth, Estate Planning, Executive Benefits, Income from your business, Life Insurance Types, Passive Ownership, Tax Efficient, Tax Free Income, Uncategorized

Over the years, I have been asked by business owners how they can use their company to create more tax deductions and to build retirement funds for themselves. When you put tax deductions and retirement funds in the same sentence, it suggests the vanilla response, of a pension plan of some type or a contributory retirement plan, like a profit-sharing plan, or a 401k. 

However, is that what a business owner is really asking? Or, do they mean, they would like to build retirement funds through the business and assume they can get tax deductions? Or do both elements co-exist in the plan that they are thinking of? I think most advisors would suggest a 401k plan, a cash balance plan, a simple plan, or a profit-sharing plan for example. 

 This is what I call the costly, KNEE JERK REACTION. When asked by a business owner, about retirement plans, I have learned to slow it down and ask the business owner to clarify exactly what they are trying to accomplish, rather than rattle off a KNEE JERK response, such as a “profit sharing plan, or 401k plan”. 

Questions like:  

–      Do you want to include everyone in the plan? 

–      Do you only want to favor yourself and family? 

–      Are you trying to give a benefit to a specific employee?

Do you want all the contributions to end up in your account, or are you willing to share with other employees? If so, how many and who?

If the employer/employee is trying to stockpile contributions to their account, they will have limitations with money purchase plans (limitations on contributions for 2022 of $58,000.) This makes it hard to deposit substantial amounts of money into the employer’s individual account, since they must include everyone. 

Based on the response, this will determine how I design the plan. If he wants to spread the dollar among the group, you are talking about a qualified retirement plan. On the other hand, if they want limitations as to who can be involved, they are speaking about a non-qualified executive compensation plan. 

In this model, I compared two scenarios so my client would have an idea of the difference in absolute dollars. I based the model on conservative values and returns, staying consistent with both types of plans. I am comparing a CEEP to a Hypothetical Pension plan (money purchase plan). [i]

As you can see in the chart below, based on the same parameters for each plan, the CEEP program created much more retirement benefits for the owner than a qualified retirement plan. 

The owner participant received a much higher payout (tax-free), than the pension plan. In addition, if the owner died, from day one, the CEEP plan would pay a substantial tax-free amount to the family, while the qualified plan would only pay what was in the account which would be taxable to the beneficiary. The CEEP death benefit would be 100% tax free and would not be required to be withdrawn at death, or older ages like a pension or IRA plan would. 

Once you compare a CEEP to the Pension plan, you can then see why defining exactly what the owner wants to accomplish is important as both plans offer different benefits and different tax scenarios. 

KNEE JERK advice happens more than you think! And when it does, it can cost your client a lot of money, NOT to mention your reputation as an advisor. 

In this case, the “Knee Jerk” suggestion to use a pension plan to solve the problem, shortchanged the business owner from having greater benefits for the future when compared to the suggested pension plan. 

[i] In this scenario, the owner could only put in $30,000 of contribution out of the $50,000.  Based on a five many company and different salary ranges. 

REQUEST our free Business Essentials Report.  This report is more than a report, it is a resource and guide to many planning ideas for business owners.  It is an immediate download CLICK TO RECEIVE. 

Awareness to succeed!

by YOUR BUSINESS WORTH, posted in Selling Your Business, Strategies of growing business, Team, Uncategorized, Valuation, Value drivers, Working On Your Business

This is the video and the narrative to post

This video is a 19-minute quick course which I put together in order .to share with you the biggest mistakes business owners make.

I call this the “Awareness to Succeed,” course. 

Owners spend most of their time on their product and services, and employee relations. This takes up much of their time. 

However, because of these time-consuming tasks, they are unaware of the other areas of business that should be understood and focused on by them, or at least have an awareness of. 

By not having some type of awareness in these areas, they run the risk of being side swiped by some fiscal impact that may have a major effect on their finances, both business wise and personally. 

This quick course will make you aware of some of the major areas you need to understand better. 

As an owner, you may not have the time to learn all that you need to know about these areas. You will learn that they are especially important and assign a professional consultant to keep you informed of your status and future developments in these areas. 

There are many changes coming out of Washington weekly that affect your business. You need a system to stay up on many of the changes. This course is designed to help you understand critical information. Take the 19 minutes to learn more about, Growth, Protection, Equity, and Transition in your business.

Once you complete this course, request a FREE download of my book “Unlocking Your Business DNA,” and subscribe to “Building and Protecting Your Business Worth Podcast.”  These are two great areas for learning. 

Request The Book: https://www.allclients.com/Form2.aspx?Key=DEC5C5C207C9803747A0458C9EB2D7C6


Subscribe to our podcast. 

https://podcasts.apple.com/us/podcast/building-and-protecting-your-business-worth/id1539791693

Rushing Through the Most Important Document in Your Business!

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

In my career I have experienced several business owners rushing through the implementation stages of designing their buy and sell agreement (BSA), probably one of the most important documents they will ever need, treating the process with little thought.   As Rodney Dangerfield would say, “No respect”.  When it was completed, it was very basic, doing more harm than good. 

In some cases, maybe more than I think, the document being used by the drafting attorney was a “hand me down” from another attorney.  While the “hand me down form” may have been useful in drafting another person’s situation and making it easier for the drafting attorney to do, it was not going to maximize my client’s planning situation.

In Paul Hood’s great book, “Buy And Sell Agreements, Last Will And Testament For Your Business”, he covers the consequences of not designing the right buy and sell agreement, and how important it is to spend the time and money preparing and designing this important document, with an experienced lawyer.  [i]

Paul specifically speaks about attorneys using a “hand me down agreement”, and how it may be more harmful by having it than not. 

The “Paul Hood Fire Drill”

He uses the idea of the “fire drill”. What happens when a “trigger happens? What will be the outcome and the consequences based on how your BSA is set up (or not set up), when you play it out. Like you were the leaving owner, and then again as the remaining owner.  On a personal note, the “fire drill” advocated by Paul is something I use all the time and has been instrumental helping my clients and their attorneys in drafting the proper strategies for their situations.  I have found that this has been a great way of helping my clients design the best BSA for themselves. It has allowed them to make it real and start developing questions and ideas that they can implement in their design. It keeps them involved with the process.

The “Fire Drill” strategy has put my clients in the “power seat” of knowledge, so when they discuss their BSA with their attorney, the elements and strategies that are being used are not foreign to them. This consequently helps them design a better BSA, reducing the time needed to spend with their attorney ($$$$$).    

Keep in mind, many business owners start the process of designing the BSA when there has been no experience of consequences with an owner or co-owner leaving the company. 

Everyone is Equal at the Start!

When owners design their BSA, they are all equal in status.  People that enter into agreements want the agreement to favor them when a triggering event happens, even if the agreement has not been updated in years or there is no reference to the triggering event. 

When are clients initially design their BSA, it probably will be one of the few times that all the partners will be negotiating with each other, because when there is a triggering event, chances are they will be negotiating with someone other than their co-owner.  

The representative of the departing co-owner will have a different perspective as to what they want out of the BSA!  Whether it is the spouse, their child, their law firm, whomever, they will be negotiating from a different point of interest.

Business relationships, and friendships are put aside.  It is at this point you would hope your BSA covers all the areas of concern that need to be covered.  The bottom line is the agreement must be exact as to what will specifically happen based on the triggering event.  There is no room for errors if the document is specific.  The best time to do this is when everyone is on equal ground. 

For this reason, owners designing their BSA with their attorney should take it very seriously because they are really pre-negotiating for the people, they love the most without any certainty of which trigger will occur and which side of the trigger they will be on, leaving or a remaining co-owner.

It is extremely important that the triggering events be identified and that you will understand what will occur with each trigger event.  

Paul Hood’s “fire drill” has made it easier for my clients to understand the importance of designing a solid BSA.  By posing questions to the scenario, the BSA becomes very real to them.  

Examples of how they would play out the “fire drill”  

·       What if you’re the first co-owner to leave?

·       What if you’re the last remaining original owner? 

·       What if you end up with a co-owner you don’t want to be owners with? 

·       What happens if one of your co-owners, dies, divorces, or goes bankrupt?  

      By implementing your “fire drill”, you will start to formulate different scenarios for your own situation creating your own buy and sell design.  

This is a critical document in keeping your business going should a trigger happen to any of the co-owners.  Unfortunately, you must deal with it in advance and before there is a triggering event. 

Risks when implementing your BSA:  

·       Using an attorney who is using a fill in the blank form.

·       Not planning the scenarios before designing the plan. 

·       Not having a BSA.

·       Not signing it. 

·       No dealing with how to fund such triggers.  

There are so many elements to the buy and sell agreement that need to be covered, the planning of this document can’t be taken lightly.  However, that is not to say you can’t have a great BSA.  Having experienced professionals to help guide you through the process will pay off great benefits in designing and implementing your BSA. 

We suggest you find competent counsel who has experience in designing the buy and sell agreements and discuss your goals and objectives with them. 

Again, my best advice is pick up Paul Hoods book (“Buy and Sell Agreements, last will and testament for your businesss”.) Read and study it. 

 If you would like our free Business Succession and Transition Planning Guide, click the link and we will send you a FREE WHITE PAPER to get you started. in your planning.   YOUR FREE GUIDE

[i] E. Paul Hood is a prolific technical author. He has published a number of books on planning and is one of the leaders in estate planning and business succession planning.