Frequently Asked Questions
Q: I am a business owner and would like to sell my business. How do I plan for this?
This may be the most important business decision you can make. Called Transition planning or Exit Strategy planning, owners need to focus on presenting the company financials attractively to buyers and this may take 3 to 5 years of complete. But the rewards may be the best of your financial life. The sale of a family business can be your largest financial asset if proper planning takes place.
Q: How will I value my business for sale?
There are many valuation techniques depending on your industry and company financial situation. Often for small businesses a multiplier of net cash flow is often used, but seeking a qualified appraisal often yields a far better price.
Q: I plan on retiring in 3 years. Will my partner be able to pay me what my share of the company is worth?
That depends on the terms of your Buy-Sell Agreement. Is it fully funded? Are all of your business documents in order to ensure a smooth sale?
Q: What is the best way to maximize the value of my business prior to sale?
Often acquisition of a strategic competitor’s business adds substantial value to a small business and provides added net income to boost your sale price.
Q: What role does venture capital play in the growth of my business?
If your business offers a high growth opportunity and you need a large sum of money to reach your goals, either angel investors or venture capitalists may be willing to step in and loan you money for a share, often hefty, of your business. Alternatives to this often high cost financing are many and can be less expensive over the long term.
Q: Our business by-laws have not been updated in many years, and our Board of Director’s seeks new authority to amend them. What is the best approach to this?
You are wise to keep up with these business procedures, especially since when you sell your company a buyer and their financial provider will look carefully at these documents to be sure all authority was in place for business decisions. Called Due diligence, it is critical to completing any business sale.
Estate Planning Law
Q: What are the basic documents for an Estate Plan?
Initially we recommend four documents:
- A WILL. Essential to provide for the distribution of your assets upon your passing. Dying without a will requires your next of kin to petition the County Surrogate for an Administration proceeding to try and determine what your final wishes would have been had you prepared a will. Should you have minor children or other dependants it will fall to the Surrogate Judge to determine your wishes and the future of your minor children.
- A DURABLE POWER OF ATTORNEY. This document provides your chosen representative with the ability to continue your financial affairs should you become unable to make your own decisions. It is a powerful document and when used together with an Advance Directive for Health Care can prevent a Guardianship litigation should you be unable to make your own decisions.
- ADVANCE DIRECTIVE. This document acts as a living will and directs a hospital as to your intentions medically should you be unable to speak for yourself. Together with the Power of Attorney this protects your spouse or next of kin in making decisions for you and your family if you are unable, and prevents those decisions from being made by a Judge who will be unfamiliar with your wishes.
- TRUSTS. If you have minor children or substantial assets you may want to provide for tax relief from Estate and Inheritance taxes, in addition to providing specific instructions regarding ongoing gifts. Many types of trust exist to meet your differing goals and to provide long-term assistance and direction to loved ones after you are gone.
Q: I have life insurance why do I need a Will too?
Life Insurance may provide funds on your death to family members, but remember it is taxable if you are the owner. Many families choose an IRREVOCABLE LIFE INSURANCE TRUST as owner of the insurance policy to remove the policy from the estate and thereby avoid additional estate taxes while providing ongoing financial support for your loved ones. Life Insurance also does nothing to distribute your possessions to those you love and so cannot replace a Will.
Q: Can I make a Trust effective only after my death so that I can control the assets until then?
Yes, certainly. Called a Testamentary Trust or a Revocable Trust. These trusts can provide many benefits.
A LIVING TRUST can provide for tax planning, can conserve your assets if you are disabled or lack full competency to make decisions. You can state your wishes clearly and direct your conservator to follow your detailed instructions to provide for your care at home as you prefer.
Should you change your instructions over time, this trust can be amended or completely revoked and redone.
Q: I know the tax law is changing often for estate taxes. What is this trust and is it flexible enough to give my family choices?
Yes, a DISCLAIMER TRUST is a flexible choice for estate planning in uncertain tax times since this permits choices to be made after your passing by your chosen representative. If made within a short period of time of your death, these choices can be very effective as an estate planning tool.