1 February 23, 2010 FPPA Presentation 2010 and Beyond – Navigating the New Economy.
BUSINESS SUCCESSION PLANNING FPPA MANAGEMENT WORKSHOP CHICAGO, IL SEPTEMBER 11, 2007.
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Transcript of BUSINESS SUCCESSION PLANNING FPPA MANAGEMENT WORKSHOP CHICAGO, IL SEPTEMBER 11, 2007.
BUSINESS SUCCESSION PLANNING
FPPA MANAGEMENT WORKSHOP
CHICAGO, IL
SEPTEMBER 11, 2007
TWO KEY ALTERNATIVES
THE DECISION TO SUCCEED BUSINESS CONSIDERATIONS FAMILY CONSIDERATIONS FINANCIAL CONSIDERATIONS INCOME TAX CONSIDERATIONS ESTATE AND GIFT TAX IMPLICATIONS
TWO KEY ALTERNATIVES
THE DECISION TO SELL FINANCIAL CONSIDERATIONS INCOME TAX CONSIDERATIONS ESTATE TAX CONSIDERATIONS EMOTIONAL AND FAMILY
CONSIDERATIONS
THE DECISION TO SUCCEED – BUSINESS CONSIDERATIONS
LEADERSHIP VISION, BUSINESS ACUMEN LEADERSHIP CANNOT BE AMBIGUOUS AN EFFECTIVE LEADER MUST HAVE A
VISION OF THE FUTURE AND BE ABLE TO GIVE OVERALL DIRECTION
PEOPLE SKILLS ARE CRUCIAL OVERALL BUSINESS ACUMEN IS THE
MOST IMPORTANT ATTRIBUTE OF A CEO
THE DECISION TO SUCCEED – BUSINESS CONSIDERATIONS
CAPITAL RESOURCES TALENT IS CRUCIAL, BUT ANY PLAN FOR
BUSINESS SUCCESSION WILL MOST LIKELY STRAIN CAPITAL RESOURCES
THIS PROBLEM IS EXACERBATED IF ALL OF YOUR EGGS ARE IN ONE BASKET
THE CONCEPT OF FAIRNESS IS SUBJECTIVE – YOU CAN’T PLEASE EVERYONE
WHETHER THE SUCCESSION PLAN IS WITH FAMILY MEMBERS OR KEY EXECUTIVES CAPITAL WILL BE STRAINED
THE DECISION TO SUCCEED – BUSINESS CONSIDERATIONS
BUSINESS AND OPERATION CONSIDERATIONS
WHATEVER STRATEGY IS USED FOR SUCCESSION, THE KEY ISSUE IS TO KEEP THE OPERATION MOVING FORWARD PROFITABLY
IF FAMILY SUCCESSION IS DESIRED, THEN KEY EMPLOYEES MUST BE KEPT IN THE FOLD
IF KEY EMPLOYEE SUCCESSION IS USED, THEN ONE LEADER MUST BE CHOSEN – LEADERSHIP BY COMMITTEE IS A FORMULA FOR DISASTER
GOLDEN HANDCUFF ARRANGEMENTS
THE DECISION TO SUCCEED – FAMILY CONSIDERATIONS
IF YOU HAVE DECIDED ON A FAMILY MEMBER OR FAMILY MEMBERS TO SUCCEED, THEN CONSIDER THIS FIVE STEP PROCESS
EDUCATE YOURSELF AND BEGIN THE PROCESS AS EARLY AS POSSIBLE
TALK INDIVIDUALLY WITH YOUR CHILDREN ABOUT THEIR ASPIRATIONS
HAVE FAMILY MEETINGS DEVELOP A GAME PLAN DEVELOP AN OUTSIDE SUPPORT GROUP
THE DECISION TO SUCCEED – FINANCIAL CONSIDERATIONS
CAPITAL RESOURCES (CONT.) THE GOALS OBVIOUSLY ARE TO
MAXIMIZE THE RETURN TO EXISTING OWNERSHIP WHILE MINIMIZING THE COST TO THE SUCCESSORS
HOW CAN YOU EQUALIZE THE VALUE OF THE BUSINESS AMONG NON-PARTICIPATING FAMILY MEMBERS
INCOME TAX BASICS
CHOICE OF ENTITY C CORPORATION
LOWER TAX RATE ON FIRST 100K DOUBLE TAXATION WILL ANYONE EVER BUY YOUR STOCK? COMPENSATION ISSUES ACCUMULATED EARNINGS TAX MANY CLASSES OF STOCK ALLOWED
INCOME TAX BASICS
CHOICE OF ENTITY S CORPORATION
PASS THROUGH TO SHAREHOLDERS ONE LEVEL OF TAX BUILT IN GAINS TAX FOR FORMER C
CORP’S TAX ON PASSIVE INVESTMENT INCOME
FOR FORMER C CORPS SELF EMPLOYMENT TAX ISSUES OF
COMPENSATION IS TOO SMALL
INCOME TAX BASICS
CHOICE OF ENTITY S CORPORATION (cont.)
NO ACCUMULATED EARNINGS TAX LIMITATION ON SHAREHOLDERS
NUMBER (POSSIBLE USE OF PARTNERSHIPS)
INDIVIDUALS OR QUALIFIED TRUSTS NO FOREIGN OWNERSHIP
LIMITATION ON CLASSES OF STOCK FRINGE BENEFIT RULES ACCRUAL ISSUES
INCOME TAX BASICS
CHOICE OF ENTITY LIMITED PARTNERSHIP
NO DOUBLE TAX NO LIMIT ON OWNERS NO COMPENSATION ISSUES SELF EMPLOYMENT TAX SECTION 754V STEP UP IN BASIS
INCOME TAX BASICS
CHOICE OF ENTITY LIMITED LIABILITY COMPANY
ALL THE “GOOD” ATTRIBUTES OF A LIMITED PARTNERSHIP AND….
NO ONE HAS TO BE ON THE HOOK FOR THE LIABILITIES
CHECK THE BOX RULES HAVE SIMPLIFIED THIS CHOICE
DOUBLE TAX EXAMPLE
FACT PATTERN:THE SHAREHOLDERS OF XYZ CORP. HAVE DECIDED TO RETIREAND HAVE MADE THE DECISION TO SELL THE COMPANY. XYZ HASALWAYS BEEN A LEADER AND AN INNOVATOR IN THE INDUSTRY. THEY HAVE ALL THE LATEST AND GREATEST EQUIPMENT AND HAVE SHOWN AN AVERAGEOF $2,000,000 IN PRE-TAX PROFITS (AVG. SALES $25,000,000) FOR THE LAST THREE YEARS. THE FOLLOWING IS A SUMMARY OF SOME OTHER KEY INFORMATION ABOUT XYZ:
FAIR MARKET VALUE OF ASSETS: REAL PROPERTY $5,000,000 MACHINERY AND EQUIPMENT $10,000,000 OTHER OPERATING ASSETS $5,000,000TOTAL LIABILITIES $5,000,000CORPORATIONS BASIS IN ASSETS (TAX BASIS): REAL PROPERTY $1,500,000 ACCUMULATED EEPRECIATION $2,000,000 MACHINERY AND EQUIPMENT $5,000,000 ACCUMULATED DEPRECIATION $10,000,000SHAREHOLDERS BASIS IN STOCK $1,000,000
M.S. ACKERMAN HAS ADVISED THE OWNERS THAT HE HAS FOUND A BUYER
WILLING TO PAY $20,000,000 FOR THE ASSETS.
DOUBLE TAX EXAMPLE
IF XYZ IS A C CORPORATION HOW MUCH MONEY WILL THE SHAREHOLDERS NET?
A) GAIN ON SALE OF ASSETS: SALES PRICE $20,000,000 BASIS IN OTHER ASSETS ($5,000,000) TAX BASIS REAL ESTATE (1,500,000) TAX BASIS MACHINERY AND EQUIPMENT (5,000,000)GAIN ON SALE 8,500,000EXPECTED TAX RATE 40.00%TAX $3,400,000
ANALYSIS OF LIQUIDATION OF CORP.:SALES PROCEEDS $20,000,000
LESS LIABILITIES (5,000,000)LESS TAX ON GAIN ON SALE OF ASSETS (3,400,000)LIQUIDATING DISTRIBUTION 11,600,000LESS BASIS (1,000,000)
10,600,000EXPECTED TAX RATE 20.00%TAX $2,120,000
NET CASH TO SHAREHOLDERS $9,480,000
DOUBLE TAX EXAMPLE
IF XYZ IS AN S CORPORATION HOW MUCH MONEY WILL THE SHAREHOLDERS NET?
A) GAIN ON SALE OF ASSETS: SALES PRICE $20,000,000 LESS BASIS IN OTHER ASSETS ($5,000,000) TAX BASIS REAL ESTATE (1,500,000) TAX BASIS MACHINERY AND EQUIPMENT (5,000,000)GAIN ON SALE $8,500,000
TAX ON GAIN OF M&E ATTRIBUTEABLE TO DEPREC. (45%) $2,250,000TAX ON GAIN OF REAL EST. ATTRIB TO DEPREC (30%) 600,000TAX ON BALANCE OF GAIN AT 25% 375,000
$3,225,000SALE PROCEEDS 20,000,000LESS LIABILITIES (5,000,000)LESS TAXES (3,225,000)
NET CASH TO SHAREHOLDERS $11,775,000
$2,295,000 MORE CASH TO THE OWNERS
DOUBLE TAX EXAMPLE
IF THE SHAREHOLDERS OF XYZ HELD ALL OF THE APPRECIATED ASSETS IN AN OUTSIDE LLC HOW MUCH WOULD THE SHAREHOLDERS NET?
A) GAIN ON SALE OF APPRECIATED ASSETS IN PARTNERSHIP: SALES PRICE $15,000,000 TAX BASIS REAL ESTATE (1,500,000) TAX BASIS MACHINERY AND EQUIPMENT (4,000,000)GAIN ON SALE $9,500,000TAX ON GAIN ON SALE (SEE EXAMPLE ABOVE) $2,850,000SALE PROCEEDS IN CORPORATION $5,000,000CORPORATIONS BASIS IN ASSETS 5,000,000CORPORATE GAIN ON SALE $0PARTNERSHIP DISTRIBUTION: SALE PROCEEDS $15,000,000 LESS LIABILITIES (5,000,000) LESS TAXES (2,850,000)NET CASH TO PARTNERS $7,150,000CORPORATE DISTRIBUTION 5,000,000TAX ON DISTRIBUTION @ 20% (800,000)NET CASH TO SHAREHOLDERS $4,200,000TOTAL NET CASH $11,350,000
$1,870,000 MORE CASH TO THE OWNERS
ESTATE TAX BASICS
GRITS, GRATS, SKINS, FLP’S, IDGTS, PRIVATE ANNUITIES, ETC. ARE ALL WONDERFUL TOOLS, BUT THEY WILL NOT BE AS EFFECTIVE IF YOU DON’T
TRANSFER APPRECIATED ASSETS AT OPPORTUNE TIMES
ESTATE TAX BASICS
TECHNIQUES FOR SHIFTING WEALTH AND CONTROL RECAPITALIZATION
VOTING FOR NON-VOTING OK IN S CORP’S
PREFERRED STOCK BUY/SELL AGREEMENTS
FUNDED/UNFUNDED LEVERAGED ESOP’S CHARITABLE REMAINDER AND LEAD TRUSTS PHANTOM STOCK ARRANGEMENTS INTRA FAMILY SALES WITH SELF CANCELLING
NOTES/OR PRIVATE ANNUITIES FAMILY PARTNERSHIPS (LLC’S) INTENTIONALLY DEFECTIVE GRANTOR TRUSTS
ESTATE TAX BASICS
OPPORTUNITIES TRANSFER COMPANY STOCK DURING DOWN
YEARS USE FAMILY LIMITED PARTNERSHIPS FOR
EQUIPMENT AND REAL PROPERTY GET SUCCESSORS IN AT INCEPTION
MAKE CERTAIN YOU USE ANNUAL EXEMPTION USE YOUR UNIFIED CREDIT NOW VERSUS
LATER USE OF INSURANCE FOR ESTATE
PROTECTION SECOND TO DIE POLICIES IRREVOCABLE INSURANCE TRUSTS
ESTATE TAX BASICS
FAMILY LIMITED PARTNERSHIP/LLC GENERAL PARTNER/MANAGING MEMBER
CONTROLS DISTRIBUTIONS NEED NOT BE PRO-RATA AS
LONG AS YOU FOLLOW THE RULES OF SEC 704(b)
VALUATION DISCOUNT FOR MINORITY INTEREST
USE PROPERTY THAT WILL APPRECIATE AND TAXATION OF CHILDREN UNDER AGE 21 PROBABLY HAVE TO CONSOLIDATE UNDER
FIN 46
ESTATE TAX BASICS
PRIVATE ANNUITIES BETTING TO LIVE A LONG LIFE CONSTANT PAYMENT OVER THE LIVES
OF THE SELLERS BASED UPON ACTUARIAL TABLES
IF UNSECURED THEN GAIN IS PICKED UP RATABLE OVER THE PAYMENTS
IF SECURED THEN GAIN IS RECOGNIZED IN THE YEAR OF SALE
ESTATE TAX BASICS
PRIVATE ANNUITIES ADVANTAGES
POTENTIAL INCOME TAX SAVINGS GIFT TAX AVOIDANCE LIFETIME INCOME CONTINUED FAMILY CONTROL ESTATE LIQUIDITY AVOIDANCE OF PROBATE
DISADVANTAGES INVESTMENT RISK NO INTEREST DEDUCTION
ESTATE TAX BASICS
SELF CANCELLING INSTALLMENT NOTES (SCIN) – BETTING ON A SHORTER LIFE
INSTALLMENT SALE THAT ENDS UPON THE DEATH OF THE SELLER
UNLIKE A PRIVATE ANNUITY IT IS FOR A SUM CERTAIN OVER A DEFINITE TERM.
MUST HAVE A COMPLETE TERMINATION OF INTEREST OR RISK ORDINARY INCOME TREATMENT
ADDITIONAL CHARGE IF INSTALLMENT NOTE IS GREATER THAN 5 MILLION
ESTATE TAX BASICS
ADVANTAGES OF A SCIN ESTATE TAX SAVINGS INTEREST DEDUCTION INCOME AND SECURITY
DISADVANTAGES OF A SCIN REMAINING INCOME IS TRIGGERED IN
THE YEAR OF DEATH
ESTATE TAX BASICS
GRANTOR RETAINED ANNUITY AND INCOME TRUSTS (GRAT/GRIT) USEFUL METHOD TO TRANSFER
PROPERTY THAT WILL APPRECIATE AT TODAY'S VALUE DISCOUNTED BY THE NUMBER OF YEARS THE TRUST CALLS FOR (GENERALLY LIMITED TO 10)
IF GRANTOR DOESN’T SURVIVE THE REQUIRED NUMBER OF YEARS, THE CORPUS REVERTS TO HIS OR HER ESTATE
ESTATE TAX BASICS
CHARITABLE REMAINDER AND LEAD TRUSTS
REMAINDER TRUST LEAVES CORPUS TO CHARITY UPON DEATH OF GRANTOR
LEAD TRUST GIVES INCOME TO CHARITY NOW WITH CORPUS REVERTING TO GRANTOR IN FUTURE
BOTH OFFER A TAX DEDUCTION FOR CHARITABLE CONTRIBUTIONS
REMAINDER TRUST TAKES CORPUS OUT OF GRANTORS ESTATE
ESTATE TAX BASICS
INTENTIONALLY DEFECTIVE GRANTOR TRUST (IDGT) TAKES ADVANTAGE OF A DEFINITIONAL ANOMALY
BETWEEN INCOME AND ESTATE TAX RULES TRANSFER IS EFFECTIVE FOR ESTATE TAX
RULES, BUT NOT FOR INCO0ME TAX RULES SHIFTS APPRECIATED PROPERTY TO A TRUST
WITHOUT RECOGNIZING CURRENT GAIN – ALL FUTURE APPRECIATION GOES TO BENEFICIARIES
ELEMENTS OF IDGT HAVE BEEN APPROVED BY IRS, BUT THEY HAVE NEVER OPINED ON THE ENTIRE PROCESS, NOR HAVE THEY CHALLENGED IT.
SIMILAR TO A GRAT, BUT NO CURRENT INCOME RECOGNITION (OR GIFT TAXES), BUT ALSO NO SECURITY.
NON-FAMILY SUCCESSION
LEVERAGED ESOP COMPANY LEVERAGES ASSETS AND
PURCHASES STOCK FROM OWNER OWNER CAN RE-INVEST PROCEEDS IN
ALMOST ANY DOMESTIC STOCK AND DEFER TAXES UNTIL REPLACEMENT ASSET IS SOLD
OWNER CAN STILL RETAIN CONTROL S CORP STATUS CAN STILL BE RETAINED
NON-FAMILY SUCCESSION
BUY/SELL AGREEMENTS A KEY EMPLOYEE CAN BE A PARTY TO A BUY
SELL AGREEMENT WITHOUT ACTUALLY OWNING STOCK CURRENTLY
CAN BE FUNDED WITH INSURANCE OR SIDE FUND, OR CAN BE UNFUNDED
USUALLY VALUES THE BUSINESS BY FORMULA
DIFFICULT TO DO WITH FAMILY MEMBERS DUE TO THE CHAPTER 14 VALUATION RULES – NON-FAMILY MEMBERS ARE PRESUMED TO BE DEALING AT ARMS LENGTH
NON-FAMILY SUCCESSION
NON-QUALIFIED DEFERRED COMPENSATION/PHANTOM STOCK UNSECURED PROMISE TO PAY A PORTION OF
PROFITS AND/OR PROCEEDS FROM SALE/AND OR INCREASE IN VALUE AT RETIREMENT DATE OR DEATH
CAN BE FUNDED WITH INSURANCE ALSO KNOWN AS GOLDEN HANDCUFF
ARRANGEMENT AS THERE WILL BE A “POT OF GOLD AT THE END OF THE RAINBOW” ONLY IF THE STAY.
EMPLOYMENT AGREEMENTS AND SALARY CONTINUATION AGREEMENTS (CHAPTER 14 RULES DO NOT APPLY)
VALUATION ISSUES
REPEAL OF SECTION 2036(c) REMOVED THE APPEAL OF
PREFERRED STOCK RECAPITALIZATIONS, AND OTHER TECHNIQUES OF FREEZING WEALTH
ADDED NEW CHAPTER 14 VALUATION RULES
SO CALLED SUBTRACTION METHOD WHICH OFTEN MAKES RETAINED VALUE ZERO IF THERE ARE “APPLICABLE RETAINED INTERESTS”.
VALUATION ISSUES
MUST NOT FOOL AROUND WITH RETAINED RIGHTS AND HAVE EACH CLASS OF STOCK PROPORTIONATELY REDUCED WITHOUT OPTIONS OR ANY OTHER RIGHT TO “EXTRAORDINARY PAYMENTS” TO AVOID CHAPTER 14 RULES
OBTAIN A QUALIFIED APPRAISAL FROM AN EXPERT AND FILE GIFT TAX RETURNS STATUTE OF LIMITATION NOW CLOSES AFTER
3 YEARS BEWARE OF PUBLIC COMPANY APPROACH
THAT IS CURRENTLY FAVORED IN THE VALUATION COMMUNITY
VALUATION ISSUES
FIND WAYS TO MINIMIZE BUSINESS PROFITS FOR SUCCESSION
MAXIMIZE COMPENSATION DEDUCTIONS AND PERQ’S
USE MULTIPLE ENTITIES AGGRESSIVELY USE FAMILY
PLANNING VEHICLES
THE DECISION TO SELL
POSITIONING COMPANY FOR SALE TAKES TIME MAXIMIZE PROFITS CLEAN STATEMENTS AUDITED STATEMENTS CONTINUITY OF MANAGEMENT S STATUS OR OTHER PASS-THROUGH
STATUS WILL ANYONE EVER BUY YOUR STOCK
THE DECISION TO SELL
FINANCIAL CONSIDERATIONS WHAT’S YOUR BUSINESS WORTH HOW MUCH MONEY DO YOU NEED OR WANT
TO MAINTAIN YOUR LIFESTYLE AND OR PASS WEALTH ON TO FUTURE GENERATIONS
LAST CHANCE TO “CASH IN CHIPS” CAN AVOID SOME OF THE DOUBLE TAX
ISSUES WITH COMPENSATION AND LEASE ARRANGEMENTS
BUYER AND SELLER MUST REPORT ALL CONSIDERATION TO IRS
VALUATION
INDUSTRY RULES OF THUMB MULTIPLES OF CASH FLOW,
EARNINGS, EBITDA PRESENT VALUE OF FUTURE
BENEFITS ASSET BASED APPROACHES
VALUATION CONCEPTSNORMALIZED EBITDA APPROACH
WEIGHTED SIMPLE AVERAGE AVERAGE YEAR 1 YEAR 2 YEAR 3
NET INCOME $179,167 $258,333 $25,000 $250,000 $500,000
NORMALIZATION ADJUSTMENTSSHAREHOLDER COMPENSATION >$150K 366,667 400,000 300,000 400,000 500,000
SHAREHOLDER "PERK'S" 54,167 58,333 50,000 50,000 75,000EXCESS RELATED RENT PAYMENTS 50,000 50,000 50,000 50,000 50,000EXCESS RELATED LEASE PAYMENTS 25,000 25,000 25,000 25,000 25,000
NORMALIZED NET INCOME 675,000 791,667 450,000 775,000 1,150,000
ADJUSTMENTS FOR EBITDAINTEREST 61,667 65,000 55,000 65,000 75,000INCOME TAXES 71,667 103,333 10,000 100,000 200,000DEPRECIATION 216,667 208,333 250,000 175,000 200,000AMORTIZATION 15,000 15,000 15,000 15,000 15,000
NORMALIZED EBITDA $1,040,000 $1,183,333 $780,000 $1,130,000 $1,640,000
PURCHASE PRICE @ 5X MULTIPLE $5,200,000 $5,916,667 $3,900,000 $5,650,000 $8,200,000
ANNUAL DEBT SERVICE @ 6% - 5 YEARS $1,206,367 $1,372,629 $904,775 $1,310,764 $1,902,348
VALUATION CONCEPTSASSET BASED APPROACH
ACQUISITION ACQUISITION ADJ HISTORICAL
CASH ($100,000) $100,000ACCOUNTS RECEIVABLE $2,400,000 (100,000) 2,500,000
INVENTORY 200,000 (50,000) 250,000OTHER 50,000 (50,000) 100,000
PROPERTY PLANT AND EQUIPMENT 4,500,000 4,000,000 500,000OTHER ASSETS 25,000 (25,000) 50,000
CURRENT LIABILITIES (2,000,000) (2,000,000)BANK AND OTHER DEBT (2,000,000) (2,000,000)
NET ASSETS $3,175,000$3,675,000 ($500,000)
EBITDA VALUATION $2,500,000
VALUATION
WHEN CAN YOU EXPECT TO RECEIVE MORE? WHEN THE ACQUISITION IS A MISSING
“PUZZLE PIECE” IN THEIR STRATEGIC PLAN!
WHEN THERE ARE SIGNIFICANT ECONOMIES OF SCALE CREATED BY THE ACQUISITION
PAYMENT TERMS
A SELLER ALMOST ALWAYS WANTS A SUM CERTAIN PAID AT CLOSING.
A BUYER ALMOST ALWAYS PREFERS TO PAY BASED UPON THE RESULTS (“EARN-OUT”)
IS THERE A MIDDLE OF THE ROAD
PAYMENT TERMS
CONTINGENT SALES PRICE SUM CERTAIN WITH PERFORMANCE
BASED INCENTIVES FOR KEY EMPLOYEES IF A STOCK PURCHASE MAKE SURE THAT
THERE IS A SUFFICIENT ESCROW SELLER FINANCING IS OFTEN CRUCIAL AS
A FINANCIAL INSTITUTION WILL PROBABLY NOT GIVE YOU 100% FINANCING
TAX CONSIDERATIONS
BUYER IS LOOKING FOR CAPITAL GAIN TREATMENT
SELLER WANTS TAX DEDUCTIBILITY? BEWARE OF THE DOUBLE TAX!
PURCHASE PRICE ALLOCATION MUST BE AGREED UPON – BUYER AND
SELLER MUST FILE STATEMENT WITH TAX RETURN
GENERAL CONCEPTS FIRST TO VALUE OF HARD ASSETS IN ORDER
OR LIQUIDITY ACCOUNTS RECEIVABLE, INVENTORY,
ETC NEXT TO APPRECIATED ASSETS
LAND, BUILDING, EQUIPMENT BALANCE TO SECTION 197 INTANGIBLE
GOING PUBLIC
VERY EXPENSIVE AND TIME CONSUMING TO DO AN IPO ALMOST IMPOSSIBLE DURING BEAR MARKETS
A BETTER APPROACH IS TO FIND A PUBLIC COMPANY “SHELL” AND HAVE IT ACQUIRE THE BUSINESS
PROVIDES LIQUIDITY AND AVOIDS VALUATION ISSUES
CAN BE VERY CUMBERSOME AND LIMITING TO SOMEONE WHO IS USED TO OPERATING A CLOSELY HELD BUSINESS SARBANES OXLEY HAS MADE THIS WORSE, BUT
SMALL PUBLIC COMPANIES HAVE BEEN EXEMPTED
SUMMARY
DECIDE AS EARLY AS YOU CAN WHETHER YOU WILL BE POSITIONING YOUR FOR SUCCESSION OR FOR SALE
MAKE SURE THAT YOU KEEP KEY EMPLOYEES AND SALESPEOPLE “IN THE FOLD”
IF YOU OPT FOR SUCCESSION PICK A LEADER EARLY AND GROOM HIM OR HER TO BE THE CEO
SUMMARY
IF YOU OPT FOR SUCCESSION START THE ESTATE PLANNING AND WEALTH TRANSFER PROCESS EARLY AND TAKE ADVANTAGE OF OPPORTUNITIES TO SHIFT WEALTH
IF YOU DECIDE TO POSITION FOR SALE YOU WILL PROBABLY NEED AT LEAST THREE YEARS TO CLEAN UP YOUR STATEMENTS