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 

The Importance of Beneficiary Designations!

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Estate Planning

Article Sponsored by:

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

Some types of assets allow the owner of the asset to name a “beneficiary.”  If the original owner later dies, ownership of the asset passes automatically to the named beneficiary.

Because beneficiary designations are easy to use, they can be a key estate planning tool.

However, significant negative tax, financial, and even personal problems can arise if the “wrong” individual or entity is named as the beneficiary.

Common Named Beneficiaries

A number of individuals, entities, or organizations are commonly named as a designated beneficiary:

●Spouse: A married individual’s spouse is perhaps the most common beneficiary

designation.  Assets passing to a surviving spouse generally escape federal estate tax because of the unlimited marital deduction.1

●Children: Children, as adults or minors,2 are often named as beneficiaries.  Step- children or other children adopted informally generally need to be specifically identified.

●Other family members: Brothers and sisters, aunts and uncles, and nieces and

nephews are frequently encountered beneficiaries.

●Estate: In some situations, the asset owner will name his or her estate as the

beneficiary.

●Trust: As a part of a more complex estate plan, a trust may be named as a beneficiary. The trust must exist at the time of death for the beneficiary designation to be valid.

●Charity: A charity may be a designated beneficiary, which can reduce the owner’s taxable estate.

●Corporation or partnership: Buy-sell agreements, key man insurance, stock

redemption, split-dollar arrangements, and salary continuation plans are all valid

business reasons why a corporation or partnership may be named as a beneficiary.

1 The discussion here concerns federal income and estate tax law.  Under federal law, If the surviving spouse is not a U.S.citizen, special rules apply.  State or local law may vary.

2 In most states, 18 is the age of “majority” when an individual is considered, for legal purposes, to be an “adult.”

The Importance of Beneficiary Designations

General Considerations in Making Beneficiary Designations

There are a number of general issues to consider when using beneficiary designations:

●Keep beneficiary designations current:Divorce, the birth of a child, the death of a beneficiary, or any number of other life changes can result in the need to update a beneficiary designation.  Lack of planning can result in an ex-spouse receiving

retirement benefits intended to provide for others or for assets to inadvertently be

paid to the estate when a named beneficiary has predeceased the owner.

●Your estate or executor as the beneficiary: In these situations, the transferred assets must generally go through a costly and time-consuming court-supervised process known as “probate.”  During probate the proceeds can be subject to the claims of creditors. In some situations there may be valid estate planning reasons for naming the estate as a beneficiary.

●A minor as beneficiary: In most states, a minor generally cannot legally enter into contracts or own property.  If a minor is named as the beneficiary of an asset, the end result is frequently an expensive court-appointed guardianship with court supervision of the use of these funds.  Once reaching his or her majority, the individual then takes control of the assets.

●Per Capita vs. Per Stirpes: A beneficiary designation form will generally use one of these two terms to specify how an asset will be distributed if a named beneficiary predeceases the asset owner.  In a “Per Capita” distribution, generally, each survivor (a living beneficiary or a deceased beneficiary’s heirs) receives an equal share.  In a “Per Stirpes” distribution, generally, a deceased beneficiary’s heirs divide his or her share into equal portions. Many states have modified these rules.

●Spousal rights: In some states, a surviving spouse may have the right to claim a

portion of a decedent’s estate, including part of assets that can be transferred by a beneficiary designation.  In Community Property1 states, a surviving spouse may have rights that need to be considered.

The Community Property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, spouses may opt-in to a community property arrangement.

The Importance of Beneficiary Designations

●Common disaster: What provision has been made for a situation in which both the asset owner and a designated beneficiary (think of spouses who travel together) die in a common disaster?  This contingency is frequently addressed in an individual’s will.

●Impact on the beneficiary: Consider how receiving an asset will impact the

beneficiary’s life:

●Is the beneficiary capable of using the inheritance as the donor might wish, or will it be wasted?  Is the beneficiary capable of managing the inheritance?

●Are there income tax considerations?  Assets such as deferred annuities, or

retirement plans such as IRAs or 401(k) plans, have varying distribution

requirements, depending on who inherits the assets.  Will one beneficiary pay less

income tax than another?

●Does the intended beneficiary need the money?

●Are there other ways, such as via a will or trust, to transfer assets to the intended beneficiary that might ultimately benefit the beneficiary more than an outright gift?

●Conflict with other estate planning documents: In some cases, an individual will

leave contradictory instructions with regard to how his or her assets should be

distributed.  For example, a will may indicate that an individual’s retirement plan

assets are to pass to a child, while the beneficiary designation form for the retirement plan shows that the ex-wife is to receive the funds.  As a general rule, the instructions contained in the beneficiary designation form will take precedence over those contained in a will or trust.

Seek Professional Guidance

While beneficiary designations are easy to use, they should be considered to be only one part of an overall, coordinated estate plan.  The guidance of experienced, trained estate, income tax, and other financial professionals is strongly recommended.

Download your free reports on business planning.  “You don’t need a Wharton School Degree to be successful in business, but you do need this… get your free reports!  Automatic download after you submit your form.  

CLICK HERE TO RECEIVE YOUR FREE “BUNDLE REPORTS”

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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

Benefit Planning Executive Bonus Arrangement1 

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Company Wealth, Executive Benefits, Funding your Buy and Sell, Income from your business, Life Insurance Types, retirement, Tax Efficient

An executive bonus arrangement is a method of compensating selected key employees in  which the employer pays the premiums of a life insurance policy covering the employee’s life. 

How the Plan Works 

●Life insurance policy: The employee purchases, and is the owner of, a life insurance 

policy on his or her own life. The employee retains – at all times – the right to name 

the policy beneficiary and to receive the death benefit. 

●Employer not a beneficiary: The employer cannot be the beneficiary, either directly or 

indirectly, of the insurance policy. 

●Written agreement: A written agreement provides for payment of a “bonus” in 

exchange for the employee’s agreement to continue working for the employer. The 

employer may also wish to pay a “double bonus” to help cover the employee’s 

additional income tax liability. 

●Premium Payments: The employer may make the premium payments directly to the 

life insurance company, or the payments may be included in the employee’s paycheck, 

with the employee paying the premiums. 

●Tax treatment – employee: The employee includes in current income – and pays tax 

on – the net premium paid by the employer. 

●Tax treatment – employer: Subject to the “unreasonable compensation” rules, and as 

long as the employer has no interest in the policy, the additional compensation is 

deductible to the employer as an ordinary and necessary business expense. 

Benefit to Employer  Benefit to Executive 
Can reward selected key executives with varying coverage amounts. The executive owns the policy. If he or she changes Employers, the policy is not lost.  
Simple to implement, with little or no administration  Accumulated cash values can be used in emergencies, at retirement, or for personal costs investments.2  
Premium costs are tax deductible. Death benefit is generally received income-tax free.  
Can be stopped without IRS approval or restrictions. Proceeds may be used for estate settlement costs.  

1 The discussion here concerns federal income tax law. State or local income tax law may vary. 

2 A policy loan or withdrawal will generally reduce cash value and death benefits. If a policy lapses, or is surrendered with a 

loan outstanding, the loan will be treated as taxable income in the current year, to the extent of gain in the policy. Policies  considered to be Modified Endowment Contracts (MECs) are subject to special rules. 

For a free report on Business Retirement Plans for Small Business Owners, click and submit. The report will be downloaded immediately. Learn how to use your cash flow to create tax-free wealth! 

Click Here! 

ESTATE PLANNING The LOST FOCUS

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Estate Planning, Funding your Buy and Sell, Life Insurance Types, retirement, Selling Your Business, Strategies of growing business, Valuation, Working On Your Business

By Thomas J. Perrone, CLU, CIC

Since the exemption credit increased to a substantial amount a few years ago, the term “estate planning” took on a new meaning.  

At one time  estate planning was considered tax planning along with other aspects of planning of your estate, depending on whether you owned a business or not.  Things like income for the family, debt payments, taxe reduction, income tax planning, and of course distribution of assets.  There was always an emphasis on avoiding estate and state estate taxes.  

However, as the exemption credit increased to the point that most American tax payers  would be exempt, the emphasis change on how estate planning was done.

However, in 2025 the sunset provision will kick in and will redefine the estate planning landscape.  The provision is set to go back to the exemption credit of about $600,000.  However, most professionals feel it will be higher.  Anyone’s guess.

With the possibility of lower exemption, estate planning will change.  I personally feel small business owners will feel the impact more than most, as their business values will increase their potential exposure to Federal and State estate taxes.   

Estate planning is an essential aspect of managing a small business. It can help ensure that your business is preserved as you want it to be, and that it can continue to operate smoothly even after you pass away. Part of estate planning for business owners will be to focus on the transition of the business more than before. If the exemption is lowered, small business owners will find themselves having to deal with a large tax at their death, upon the transfer of the business. Much can be avoided by doing planning now and using the exemptions available today.

Areas that need planning are:  

  1. Drafting a will and basic estate plan.
  2. Planning for tax efficiencies.
  3. Sorting out issues in family-owned businesses.
  4. Drafting a buy-sell agreement (for multi-owner businesses).
  5. Purchasing life and disability insurance.
  6. Creating a succession plan.
  7. Having a discussion with affected parties.

In order to have a proper discussion about estate planning the short video below will help you understand the main concept of asset distribution.  If you are a small business owner, this information may be critical to your planning structure.  

Request our FREE ESTATE PLANNING GUDIE FOR BUSINESS OWNERS:

For our FREE ESTATE PLANNING GUIDE FOR BUSINESS OWNERS, submit this short form AND the Estate planning guide will download immediately.  

The Guide covers many of the areas you need to understand when doing your estate plan. It is also written in language you will understand.  

Download Your Free Estate Planning Guide 

CLICK HERE

For a better understanding of Estate planning view this short video of how asset distributions work in different estates.

Note: I engage in a working relationship with professional advisors for their business cases.

203 530 6615

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.

“Unlocking Your Business Wealth?  

Featured by YOUR BUSINESS WORTH, posted in Business Growth and Transition, Company Wealth, evaluations, Income from your business, Key People_Or Group, Selling Your Business, Strategies of growing business

By Thomas J. Perrone, CLU, CIC

A great business book has just come out. Its called “Unlocking Your Business Wealth”, written by Brian Kerrigan.

Brian is a specialist in business growth. He is extremely passionate about helping business owners build wealth in their business so they can become financially independent in the future and enjoy the lifestyle financial freedom brings.   

Many business owners run their business with the focus on personal income, and the freedom of time.  However, the business can also be a valuable financial asset worth much more than the salary being earned.  Business wealth is an asset that can create financial independence for the business owner.   

Many business owners also put too much wealth in their business and when they wish to use this equity find it difficult to get out, or extremely expensive to get out. In many cases, it can be lost due to the market and elements of the business environment.   

In this book, Brian discusses the building of business wealth and the opportunities it creates. Each chapter is a steppingstone to create business wealth.  

A great short read, and necessary if you are an entrepreneur.   

Brian discusses parts of the book, how it will help you grow your business and help you to avoid the traps that you may experience in your business life.  

To Contact Brian:  

860) 303-8929‬ mobile 

Email Brian:  bkerrigan@taylorfoleylaw.com to schedule a complimentary consultation to discuss your results and lay the foundation for your future success. Remember, the first step is often the hardest, but it’s the only way to reach the top. 

Enjoy our recent podcast with Brian about his wonderful book!

https://podcasts.apple.com/us/podcast/building-and-protecting-your-business-worth/id1539791693?i=1000626000478

To Order Brian’s Book

Enjoy Brian’s flip book.

https://publuu.com/flip-book/47240/465013/page/1

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.