I read somewhere that over the next number of years, at least one in every four small businesses will be sued or threatened with a lawsuit. The odds are great that it will come from within the company.
Will your death, disability, or withdrawal cause a dispute? In many cases it can come from not having communicated the exit or transition plan for the company.
Your Corporate Board of Directors
The Board of directors in your company is crucial to the short and long-term success of the company. The board helps in the avoidance and resolution of disputes. The board can help direct the company’s planning, officer selection and the compensation. The board can help in dispute avoidance, dispute resolution and overall corporate management.
Disputes, can come from compensation agreements, benefits, health co-pays, benefits paid. These are many other ares which a dispute can occur. The hope is that there is a board of directors to help with the resolution.
When the owner dies, becomes disabled or just wants out of their business, and there is no business continuation or a buy and sell, the risk of a dispute rises. A buy and sell agreement will establish the rules in the event a trigger that sets off a change within the business. Remaining partners will need to know what the value of the company stock will be sold for. The surviving family will need to know what the value of the business is and what the family expects to do with the company values. Without a solid written plan, there are unanswered questions and confusion. Continue reading “Your Exit From Your Company!”
Selling your business to a key employee, or a group of employees.
Assuming that all of the purchase price is to come from the key employee (s), you can help the purchase, by (a) using a stock dividend distribution, or (b) bonus of money to the employ, such as a bonus executive program. (See Restricted bonus agreement).
It is important that the company have consistent cash flow, (discretionary cash flow;) to use for this purpose. (This is the cash generated by the company which is not needed to run the operations, for debt service or capitalization of the business).
Planning for the sale of the stock to insiders, and cash flow;
It is important to have a accurate idea of the yearly cash flow. For example, if the discretionary cash flow is $1 million a year. You might commit 10% of the company, or $100,000 a year to help pay for stock. Continue reading “Creating Cash Flow In Your Business”
If I sell my business today, pay my taxes, brokers and professional advisors, and “I then invest the remainder conservatively, will I still be able to enjoy my current lifestyle?” Most business owners have asked themselves this question. After building a successful business, they wonder if they will net enough cash from its sale to maintain their standard of living. Often, after calculating the potential returns of investing the sale proceeds, they realize they can make more money by holding onto the business and becoming “passive” owners.
Continue reading “Will You Go Broke Selling Your Business?”
Business owners have experienced a well-publicized meltdown in traditional financing. Now they want to know how they can prevent themselves from being vulnerable again!
Become Your Own Bank
What if you set a goal today to accumulate money on your own? Shore up reserves for use in emergencies in your business, or for business opportunities, investments and personal retirement. You take care of your employees, your vendors and your customers. What if you think about taking care of yourself? Traditional savings vehicles are not as attractive as they were in the past. Many companies have eliminated pension plans. Those companies that haven’t are finding that, in many cases, the owner can’t put a substantial amount away for himself. Today’s business owner wants to accumulate money for the future’s “what ifs” without depending on outside financing sources.
Set up a SIP
The solution is a supplemental income plan, or SIP. If properly designed, a SIP accomplishes several things. The growth is tax-deferred. If accessed correctly, the gain is tax-free. There are no contribution rules and no required distributions. Moreover, there is a pre-retirement survivor benefit paid to the family in case of the death of the business owner, also tax-free. With the cash flow rigors of owning your business, putting money aside gets more difficult every day. Traditional methods no longer work or are no longer attractive. Safety is a greater concern now than in the past. Business owners want to control their own financial destinies without depending on credit lines, business loans and outside financing. What if, going forward, you finance your own business purchases? Every cent you pay in financing costs is lost forever. Eliminate these costs in the future and use your SIP for purchases, investments, opportunities and emergencies. The savings on financing goes back into your pocket. This is perhaps the best recession-era lesson for business owners to absorb today and to never forget in the future. Do not rely heavily on outside funding in the form of loans, vendor financing or even business credit cards.
Today’s business owner wants to accumulate money for the future’s “what ifs” without depending on outside financing sources.
Do It for You
Right now, business owners must take care of themselves because no one else is going to do this for them. Valley business owners constantly tell me they are tired of lying awake at night, staring at the bedroom ceiling and worrying about cash flow. A supplemental retirement plan is simple. It does not involve any administration or fees. There is no ERISA or IRS involvement. Where is the best place to invest as you bulk up your SIP? In the past, you had two choices. You had market-driven vehicles that we now realize can be a roller coaster ride or safe vehicles that yielded small or no returns. Here is a new option for you and your professional financial advisor to consider. Life insurance—a product that has been around for more than 200 years—may present the flexibility and growth you seek.
Continue reading “What If I Want to Take Care of Myself?”