TRUST ATTORNEY LAS VEGAS | MORE THAN WHAT YOU HAVE READ?
TRUST ATTORNEY LAS VEGAS | MORE THAN WHAT YOU HAVE READ?
Hello and welcome to trusted. This is Blake Johnson, your host. And today we are going to talk about business succession planning. So you’ve done a great job, you’ve built up this business and um, you know it’s successful and now we got to talk about what’s going to happen, uh, when you want to retire or when you want to, um, or if you pass away. So what’s the, the steps or options that you have and there’s really three main options that you have. There is a, you can give it away to someone, whether that’s, um, you know, kids or an employee or somebody else. You can sell it or you can let your, you can let the company die, basically. Just shut it down Trust Attorney Las Vegas. And that’s the end of it. So what do each of those look like? So let’s start with, um, selling it, cause that’s probably the most, um, exciting, uh, way of, of transferring your business.
So who could you sell it to? Well, you can sell it to an outside party. That’s what most people think of when they sell a business. It’s somebody else coming in and buying, uh, buying your business. And what you need to have is you need to have a business that has a system that is beyond you. So there’s no actual products there. There is a process of doing that. There’s lead sources, there’s suppliers, there’s intellectual property and it’s all documented and it’s written down and somebody can handle it whether you’re there or not, that’s going to be the get you the biggest bang for your buck. Now, um, it’s also the hardest one to do, uh, because you have to have everything written down so clearly. And even if you do, try to find an outside interested buyer is very difficult, but you can be done.
And that’s usually where you can get the most bang for your buck if you have it done right. Um, I guess under that you could also do, uh, an IPO. What’s an initial public offering? So if you have a corporation, you want to take it public and that means it’s sold on a stock exchange. That’s a form of selling your business and you can have that be your succession plan Trust Attorney Las Vegas. And then the, there’s a board of directors that take over management of the company and they hire people to, uh, to run the day to day stuff. Uh, now if you go to an initial public offering, there’s a lot more compliance that has to be done. You were better have your business set up right. I’ll have all your ducks in a row. All of your reporting down, all of your taxes filed, everything has to be super clean if you want to make that happen.
So definitely an option. Super successful if you can get it done. Very rewarding, but it’s going to be a lot of work to do that selling to an outside buyer next. Most a grueling cause you’ve got to have everything in row, there’s going to be audits, they’re gonna make sure you know what your business is actually worth, what you, you say it is that the actual money’s coming in, you have all the reports to back it up. And then you also have the system and the components that you say you have so that they are willing to actually pay you for that. Now, they may do require you to stay in the business for a few years to help with that transition. And, um, and maybe contingent upon, you know, they’re, the purchase price may be contingent on you hitting certain numbers with growth. So sometimes that may not be the best option.
Now, another option is you could sell it to a child or to a sibling or somebody within the family, um, because maybe they work in the business with you, they know what’s going on. You could sell it to your partner, your co-owner there. And um, you know, that makes it a little bit easier to get out cause they know what’s going on. They know the system, they’ve been there, they’ve seen it all done Trust Attorney Las Vegas. And so you’re a compliance side of things of getting, you know, the reporting and everything done may not be as big a deal as if it’s an outside party, but there’s still gonna be some stuff there that needs to be done. You obviously have to come to an agreement and make sure you have the terms in place. Uh, if they’re going to get financing for it, you have to line all of that up as well.
Um, you could also sell it to an employee. Uh, that’s another easy way to transition the business is an employee who’s been there, a, they’ve been a key person. They understand what’s going on and they’re willing to do that. Now they may not be able to qualify for the financing for it. So you may have to do it what’s called owner financing, where you finance it and they just pay you a monthly amount over a certain period of time. Um, but those are, those are some options there for selling it. So it’s all kind of under that umbrella. But you can sell it to, to really anyone, child, employee, family member, co-owner outside party, or you can take it to initial public offering where it’s sold to the public. Now let’s talk about giving away your a business. Let’s say you’ve built it up, it’s successful, um, but you just want to pass it onto your kids.
When you pass away, you’re gonna work till the day you die. Cause it’s something that you love to do. There’s no problem with that. But we want to make sure that if you do want to pass it upon your death that you have it set up, you have it set up right. So that’s where I’m having a trust in your will in place. Having that succession plan for your personal side match what it is on the business side. So even within the trust, you can specify not only who gets the business Trust Attorney Las Vegas, so you could have all ownerships spread equally amongst your kids. But if you have one particular kid who’s, you know, the manager of the business or who’s been working there with you and knows the ins and outs you can designate and say, this person is to be the manager of the business or the president or the CEO, whatever you want to call it.
And they’re to run the day to day business. And maybe you give them a little bit more so that they have a higher voting percentage to help incentivize them for, for taking on that extra work. Uh, and then the rest just are, you know, silent partners. If they want to work in the business, that’s something that can be discussed amongst them down the road. But, uh, that’s very, very key that you have your estate planning done on the personal side to match your business estate planning or your business succession plan and have those coincide. I would also recommend if you’re the only owner of the business that you, um, within your operating room is say who you want to take over. If you have partners, then you definitely want to in there and say, you know, if all of us pass away, this is who we want running the business.
This is how we want it set up. And you can even say, um, you know, amongst the partners how if one of them dies, um, you know, how that supposed to be, to be done, that it has to be purchased. Uh, the company has to purchase shares from the family so that the surviving partner keeps the business, but the family still is compensated for it or the family can stay involved Trust Attorney Las Vegas. They’re just silent partners at that point and just collect, um, you know, the, the distributions from it. So that’s, you know, something that you probably want to get done if you have partners probably from the outset because you never know what could happen. And, uh, you know, it helps to have those things written ahead of time so that there’s not fighting in and say, well, we thought, I thought we were doing this.
You know, we talked about this because if it’s not in writing, it’s really not enforceable. It’s just going to go to default law. And you know, that’s usually not what the partners had originally intended. When, if that’s the case, I’m giving away, your company does not have to be limited to family. You could give it away to a key employee. You could do it during your lifetime as well. Um, there may be some gift tax consequences if you do it during your lifetime. And so you just want to talk to, you know, your CPA and also your estate planning attorney to talk about what that’s gonna look like. Um, and sometimes it does make sense to do gifting over a period of time. So each year you gift a certain amount so you don’t have to file the gift tax returns and you get money out of your estate.
So it can be a great estate tax planning strategy as well as a business succession plan. So you still can maintain ownership and be involved. But slowly over time you’re gifting more shares, getting them more involved and helping them learn the system as well as getting the money out of your state. So really a really cool thing to do if you, if you’re willing to give it away and you’re not willing to sell it, um, you know, that can be a great strategy for you. Now the last one is just to, to not do anything. And that’s usually the worst case scenario. Now, if, if it’s a business that’s a service business, it’s tight exclusivity to you Trust Attorney Las Vegas. There’s no value if you’re not working in the business, obviously that’s what’s going to happen when you pass away. Business just goes away. You know, they sell any assets that happen to be owned by it, you know, any, you know, the desks and the computers and that stuff.
But other than that, there’s not really a whole lot of value. Um, then then you just let the company die, but you, uh, you file to dissolve the company. And even you can do that when you retire, you can say, Hey, look, I’m done. There’s nothing, there’s nobody to take over. There’s no real business other than me, so you just shut down the business and that’s it. Um, but you do want to make sure you actually formally dissolved the business with the state that it’s registered in just to show it’s been shut down properly. Follow your final tax return declared as your final tax return, and just make things clear from that standpoint. And that’s really it for business succession planning. Uh, you know, if you have any questions, talk to a business attorney, uh, an an estate planning attorney. Sometimes they don’t do both.
Sometimes some, you know, business attorneys focus solely on just operational sides. They don’t talk about the succession plan. And then, um, you know, the estate planning attorney may just do the personal stuff that you want to make sure those things are married together. We obviously do both. Um, we talk about the personal side, how that works with the business side, and we want to marry those two and make sure that they actually are going to coincide and make the right estate plan and trust is going to work for your business. So thanks for listening in today and we’ll talk to you next time. If you’re not already a subscriber, please take the time to subscribe via iTunes and Spotify when we get that up. And if you would leave us a review that helps us get known by more people so that we can, um, help spread the word and educate more people about, uh, estate planning and other things that require trusting others. Thanks.