Advances or capital contributions made to a limited liability company without authorization may be a source of conflict. Using unauthorized advances or capital contributions as a means to exert control may be a breach of fiduciary duty. A well-drawn operating agreement addresses how and when the owners put additional money…
Shareholder disputes in a closely held business threaten the business and personal financial interests of the owner. New Jersey law provides the owners of a closely held corporation with rights and remedies that assure access to information and the financial benefits of ownership. Closely held corporations can use effective planning…
Transfers of business interests routinely seek to benefit from the discounts that accompany lack or control and marketability. Reducing the assets in an estate obviously reduces estate tax liability and the application of discounts in the transfer made during one’s life can result in significant tax savings. The IRS, however,…
Effective strategic planning for the closely held business owner should begin with a formal valuation. The information gathered and considered in a business appraisal provides insights into the business overlooked in day-to-day operations. Valuation studies provide an insight into the potential value of the business and roadmap to to becoming…
Intangible assets are typically the most valuable possession of a closely held business, but often are poorly protected. Risk mitigation through a business bulletproofing process can protect those assets from being misappropriated. Intangible assets include customer relationships and intellectual property. I sometimes ask closely held business owners if they lock…
The Need to Exit Our Closely Held Business is Non-negotiable. We all leave, eventually. Exit and succession planning protects our business, our employees, and our families. The effects of most business disasters are avoidable. “Hope is not a strategy.” Vince Lombardi If you own a business, you know that ‘winging…
The vast majority of the personal wealth of most business owners is the value of their business. Getting access to that trapped wealth in the owner’s business is a principal goal of a successful access plan. Business owners without an exit plan may never realize the potential value of their…
Business owners that fail to plan for their lives after exiting their business often report ‘seller’s remorse’ and dissatisfaction with their lives. Understanding and planning for the personal after exiting a business focuses on two-part personal question: who we are outside of our business and what are our personal goals.…
Using keyman insurance to fund equity redemptions is likely to increase estate tax liability. US Supreme Court holds that keyman insurance proceeds of company-owned policies are an asset of the company, regardless of a contractual obligation to fund an equity redemption. Cross-purchase agreements funded by insurance should avoid these estate…
Valuing a business on an ongoing basis is intended to avoid valuation disputes in litigation and provide fairness and predictability. Courts enforce contractual language that establish the the value of a closely held business based on valuation reports conducted by the owners for non-litigation purposes. Courts are likely to view…