The Entrepreneur’s Corner
Solidifying the long-term future of your business
Here’s an important question for busy business owners – what’s next for your company? Not just tomorrow or even in the months ahead, but when the time comes that you or one of your key employees retires or leaves the organization unexpectedly?
At a time when many baby boomers are thinking about retirement, those who own a business need to plan not just for their life after work, but for the future of the firm they’ve committed so much of their lives to. In a small- or mid-sized business, the owner and perhaps other key personnel play such a vital role that special planning is required to prepare for circumstances in which any of these individuals is no longer part of the organization. If your business doesn’t have a succession plan in place, it is an issue that needs prompt attention.
There are a number of questions to consider in helping prepare for the period of transition a company inevitably faces. They include:
• Who is in line to follow the principals of the firm? The most fundamental aspect of a succession plan is to have a replacement (or replacements) in line. In many cases, a family business will move from one generation to the next. In other situations, a trusted employee or group of employees may need to be groomed and prepared to assume control of the company in the future.
• How will control of the business be transferred? Once successors are identified, there are a variety of ways that control of the business can be transferred to them. Among the options are an outright sale to the new owner – either in a one-time transaction or an installment sale – or the use of a trust vehicle, such as a grantor retained annuity trust (GRAT) or a grantor retained unitrust (GRUT). Those are irrevocable trusts to which you transfer appreciating assets while retaining an income payment for a set period of time. At either the end of the payment period or your death, the assets in the trust pass to the other trust beneficiaries (the remainder beneficiaries). The value of the retained income is subtracted from the value of the property transferred to the trust (i.e., a share of the business), so if you live beyond the specified income period, the business may be transferred to the next generation at a reduced value for estate or gift tax purposes.
An important consideration in the decision-making process is potential tax ramifications, particularly for the seller. There are tools available to help reduce the potential impact of capital gains, estate and gift taxes when a sale occurs. Good planning plays a critical role in making sure that both the seller and the buyer achieve the most favorable results.
• What forms of protection are in place in case an unexpected event occurs? The need to implement a succession plan can sometimes strike without notice. Businesses that involve partners or likely successors, for example, may benefit from having a buy-sell agreement in place.
A buy-sell agreement lets you keep control of your interest until the occurrence of an event that the agreement specifies, such as your retirement, disability, or death. Other events, such as divorce, also can be included as triggering events under a buy-sell agreement. When the triggering event occurs, the buyer is obligated to buy your interest from you or your estate at the fair market value. The buyer can be a person, a group (such as co-owners), or the business itself. Price and sale terms are prearranged, which eliminates the need for a fire sale if you become ill or when you die. Remember, however, that you are bound under a buy-sell agreement.
Business succession is a complex matter. It involves close work with a financial advisor, tax specialist and an attorney experienced in these types of matters to structure a solution that is most suitable for your business and potential successors.
The Sandston Rotary Club recently donated $1,000 to the Sandston YMCA for its Bright Beginnings program, which helps provide children in need with school supplies for the new school year. > Read more.
To help celebrate twenty years of service to advocating for abused and neglected children in Henrico County, Henrico Court Appointed Special Advocates, Inc. (CASA) will host an evening with bestselling author K.L. Randis on Tuesday, Aug. 26, from 5:30 p.m. to 7:30 p.m. at Belmont Recreation Center in Lakeside.
Randis is best known for her bestselling novel, Spilled Milk, which tells her painful – but ultimately triumphant – personal story of abuse and of child abuse prevention. The book is her first novel.
The Ambassador of the Philippines to the United States Jose L. Cuisia, Jr. attended the Ninth Annual Filipino Festival at Our Lady of Lourdes Church earlier this month. Cuisia (pictured above with festival performers) was welcomed by County Manager John Vithoulkas and Brookland District Supervisor Dick Glover (below) at the church, which is located in Lakeside.
While enjoying some of the cultural performances at the festival, the ambassador and his wife had a private lunch with Vithoulkas, Glover, Eldon Burton (an outreach representative from U.S. Senator Mark R. Warner’s Office) and Father James Begley, the pastor of OLL. > Read more.
Short Pump brewery offers more than just beer
I am still (happily) thinking about my entire experience at Rock Bottom Restaurant and Brewery last week. Knowing nothing about this new brewery out of Denver, I was leery of brew-pub in the heart of Short Pump Town Center – this is not what I’d usually think of as a perfect fit, and yet, it was.
The restaurant and craft brewery opened in early June and features 10 beers made by female brewmaster Becky Hammond (pictured). This is the restaurant’s second location in Virginia; the first is in Arlington. Behind glass walls, customers watched the beer brewing in massive steel barrels. For our up-and-coming beer region, it makes sense that Short Pump would jump on board.
As I walked up to the back of the mall near the comedy club, I was taken aback by what I saw: at the top of the stairs was an overflowing restaurant with outdoor seating, large umbrellas and dangling outdoor lights. > Read more.
The Cultural Arts Center at Glen Allen is now registering participants for its fall 2014 schedule of classes.
The center will offer more than 100 classes for children and adults, covering topicssuch as culinary arts, fiber arts, visual and performance arts and more. Instruction is structured to appeal to a wide range of abilities, from beginners to experts of all ages. Class sizes are kept small to ensure maximum benefit for participants with generally no more than 15 students. > Read more.
Find out how your favorite dining establishments fared during their most recent inspections by the Virginia Department of Health. > Read more.
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CalendarToast New American Gastropub, 7007 Three Chopt Rd., will host Toast to RVA Day every Monday from 11 a.m. to midnight where the featured local charity will receive 10% of… Full text