Plan an Exit
For closely held businesses, passing the torch can feel like an overly complicated and unreasonably expensive process. Taxes, capital gains on proceeds from the sale, commissions, lender’s fees and interest on loans feel like punishment directed toward a business for building sustained success. What ought to be a joyous time in a business owner’s life turns into a perplexing, frustrating and expensive closing chapter.
As a privately owned business ourselves, Omnia Executive understands our clients’ needs. We can help you strategize for and smoothly administer your exit, all while minimizing costs and inefficiencies. Our niche team of professionals will provide you with only the necessary personnel to ensure your exit keeps funds where they belong — in your business and out of the pockets of high-priced brokers.
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Facing an Uncertain Future
In our experience, business owners aren’t where they want to be when it comes to exit planning for a variety of reasons. Executives wear many hats and are locked in on the day-to-day, year-to-year demands of operating a successful company. Planning an exit isn’t at the forefront as you work to ensure your business excels while pushing off worrying about retirement for later.
It’s also possible you feel like your business isn’t marketable enough or the right successor isn’t lined up, so the business will simply cease operations. Perhaps you’re unsure what your next steps will be after leaving the business, so you understandably kick exit planning further down the road. Or the exorbitant taxes, fees and commissions plus convoluted variables affiliated with the transaction give you reason for pause.
We’re here to help. Traditional methods for exit planning — including owner financing, obtaining a lender, bank or business broker — are expensive and inefficient. The truth is a good number of private businesses need only a corporate attorney, a quality CPA and a wealth manager or retirement plan consultant who is competent in executive benefit plan design.
It’s unnecessary to overpay on taxes and business brokerage fees for this service. Omnia helps business owners create a simplified, tax-efficient exit strategy. Our services include an informal valuation determination, stock position timeline, key-person insurance coverage and coordination with legal counsel. We’d love to provide you clarity on what a smooth, affordable exit plan can look like.
Omnia Executive Can Help
It’s a juggling act to determine how to obtain the cash needed from the business in order to retire without taxes and fees sucking value from the company. Business owners with a high net worth typically pay about 40 percent in taxes year over year, while a capital gains tax on proceeds from the business sale is one more costly ding. Learn more about saving on taxes here.
By the time you’ve owner-financed a buyer and paid off fees and commissions, you enter retirement with a fraction of the actual company valuation. That’s not even taking into account risks involved with hoping the buyer maintains the business’s success to pay off debts. It’s no wonder nearly half of business owners have no succession plan in place.
So, what do you do? An ESOP (employee stock ownership plan) is a strong option for owners looking to get cash out of their business in a tax-friendly manner. But ESOPs are cumbersome, costly to run and more appropriate for large corporations. They also require owners to sacrifice equitable interests, which is often a dealbreaker for family-owned businesses.
Lesser-known alternatives — defined benefit plans and non-qualified deferred compensation plans — allow owners to shuffle substantial amounts from the business to their personal retirement. These vehicles enable owners to cash out when retirement beckons, simplify the transition process and minimize tax consequences.
Additionally, defined benefit plans and non-qualified deferred compensation plans can potentially help owners avoid involving a business broker or at least significantly reduce their commission costs. These plans leave a strong paternal legacy with employees while maintaining complete control over the disposition of company stock.
Summary
Privately owned businesses are the backbone of the U.S.’s economic health and substantial contributors to keeping Americans employed. As such, passing the baton from one generation to the next is of critical importance. If you’re not where you’d like to be for this transitional phase or want to know what options are at your disposal, Omnia Executive would love to partner with you to help.
