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…
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…
The application of a control premium more than doubled the claimed value of a business purchased its employees through and ESOP An investment banking firm involved in the transaction is subject to claims that it was biased because the fee it earned was contingent on the purchase price. The valuation…
Understanding the valuation of the business is critical to the owners of closely held business in planning and management. Closely held business owners typically have most of their personal wealth tied up in their company, but rarely know the current value of the enterprise. Current valuation data is important for…
Enterprise goodwill is the expectation that a business has in the continued patronage by its customers, regardless of the individuals involved. Personal goodwill is the expectation of continued patronage because of an individual’s continued participation in the business. Personal goodwill is not an asset owned by a business, but it…
A New Jersey Court conducing the valuation of a business may use any technique or method generally acceptable in the financial community. The application of a minority discount is a question of law, but likely will be based on the factual determinations of the court about the culpability of the…