Getting Ready to Get Ready

Getting Ready to Get Ready: Pre-Sale Tips for Business Owners

For successful business owners, the prospect of selling one’s company presents both an emotional and a logistical maelstrom. There are so many decisions to be made, and an entrepreneur’s bond to the company goes deep. “When should I sell?” “Do I want to stay involved?” “What if my kids want to be involved?” and “How would the sale impact them?” are among the myriad of questions one has to confront.

The right expertise can assist you and your family in thinking through some of these wrenching concerns and help you navigate family dynamics and the psychological journey of selling your life’s work.

If you are a business owner who wants to minimize the effects of income and estate tax and maximize wealth you can pass on, early planning is critical. Some of the options to consider as part of a broader wealth strategy plan include:

1. Gift shares in trust

Gifting non-voting shares of the business into a trust, at a discounted value, prior to the sale is a straightforward and effective choice. The total discount for shares can be substantial and the owner can shift value from the taxable estate while maintaining control of the business.

2. Grantor Retained Annuity Trust (GRAT) or Sale to an Intentionally Defective Grantor Trust (IDGT)

If your target is wealth transfer with minimal use of the gift tax exemption, these pre-sale “estate freeze” techniques may support your goals. The two share many characteristics, although options may vary based on your type of business and goals.

3. Charitable Remainder Trust (CRT)

If you are charitably inclined, and would welcome an income tax deduction along with a stream of payments post-sale, a Charitable Remainder Trust (CRT) could be something to consider. Donating appreciated assets to a CRT can result in a deferral of capital gains, potentially allowing for diversification of assets without immediate impactful tax liability.

Comprehensive Advice and Expert Guidance Matters

When to sell and how to sell takes time and careful consideration. Various experts should be engaged to help decipher the myriad of options and hone in on choices that match your strategic goals. The Rockefeller name is synonymous with generational success now, but it didn’t happen overnight. That generational success was enabled by sound advice and thoughtful planning with a long-term view. Our Private Advisors work with clients in these situations to review financial goals and assemble a dedicated team of experts in wealth strategy and investment banking to discuss specific planning ideas and action items for implementation. The type of industry your business is in will also determine the most suitable strategies to consider when selling. Ensuring your team of experts has specialized expertise in your industry is essential.

Never Too Soon to Begin Weighing the Options

Sometimes unforeseen circumstances arise that could have a negative effect on your sale. While you can’t plan for everything, focusing on pre-sale planning today, well before a transaction is made — and before the business has appreciated significantly — is to your benefit. Reducing the impact of future income, gift and estate taxes is just part of the picture. Minimizing family conflicts and avoiding mistakes before they happen are just a couple of examples of how a Private Advisor can help you sidestep problems before they occur.