The Entrepreneur’s Corner
By Justin Martin, Special to the Citizen 08/25/11
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.
Citizen Staff Reports 03/21/2017 Transportation
Work to repair a leaking water main or valve will require lane closures beginning at 8:30 a.m. Wednesday, March 22 near Gayton Road and John Rolfe Parkway.
Westbound Gayton’s left turning lane and left through lane will be closed. Westbound traffic will be shifted to the right through lane. Eastbound Gayton’s left through lane will be closed at John Rolfe. Eastbound traffic will be shifted to the right through lane. > Read more.
Citizen Staff Reports 03/21/2017 Health
HCA Virginia's Henrico Doctors' Hospitals recently was named one of the nation’s 100 top hospitals by Truven Health Analytics, a provider of information and solutions that support healthcare cost and quality improvement.
Henrico Doctors’ Hospitals consists of three community hospitals – Henrico (Forest), Parham, and Retreat Doctors’ Hospitals – and two freestanding emergency departments, West Creek Emergency Center and Hanover Emergency Center. Henrico Doctors’ Hospitals specializes in heart and stroke care, women’s health, oncology, orthopedics, urology, and behavioral health. > Read more.
Citizen Staff Reports 03/21/2017 Government
Henrico County Public Library is planning community meetings March 28-29 and April 1 to receive input from county residents on the design of a new Fairfield Area Library. Meetings will be held at the Fairfield Area Library, 1001 N. Laburnum Ave., and at the Eastern Henrico Recreation Center, 1440 N. Laburnum Ave.
Architects from BCWH, Inc. will join library staff for the meetings, which will feature discussions and seek ideas on spaces and services for specific age groups as well as designs for the entire facility. > Read more.
Citizen Staff Reports 03/21/2017 Education
Time is running out to enroll in a program to prepay tuition at Virginia public colleges and universities. The current enrollment window for Virginia529's Prepaid529 ends March 31. Nearly 50,000 Virginia students have funded college costs through this program since it began 20 years ago.
Prepaid529 allows families to purchase semesters of tuition and mandatory fees for newborn children through ninth graders. Semester prices vary based on the age of the beneficiary. > Read more.
MAR. 21, 9:30 A.M. – Henrico Police are seeking the man who robbed a Wells Fargo Bank on Brook Road Monday evening.
At approximately 5 p.m. March 20, police responded to the bank, in the 8100 block of Brook Road, after reports that a white male had entered the business and presented a note demanding money. > Read more.
St. Joseph's Villa’s Flagler Housing & Homeless Services was one of three entities to earn the National Alliance to End Homelessness' Champion of Change Award. The awards were presented Nov. 17 during a ceremony at the Newseum in Washington, D.C.
NAEH annually recognizes proven programs and significant achievements in ending child and family homelessness.
Flagler completed its transition from an on-campus shelter to the community-based model of rapid rehousing in 2013, and it was one of the nation's first rapid re-housing service providers to be certified by NAEH. > Read more.
Richmond International Raceway's 13th annual Community Christmas tree lighting has been rescheduled from Dec. 6 to Monday, Dec. 12, at 6:30 p.m., due to inclement weather expected on the original date.
Entertainment Dec. 12 will be provided by the Laburnum Elementary School choir and the Henrico High School Mighty Marching Warriors band. Tree decorations crafted by students from Laburnum Elementary School and L. Douglas Wilder Middle School will be on display. Hot chocolate and cookies will be supplied by the Henrico High School football boosters. > Read more.
For our Top 10 calendar events this weekend, click here! > Read more.
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CalendarVirginia Grace Event Management will present Wedding Budget Basics, part of its second annual Bridal Breakfast Series, at 9:30 a.m. at Mosaic Catering & Events, 3001 Cutshaw Ave. Hosted by Nadia Anderson, CPA and certified wedding and event planner, the class will be interactive and informative and will help begin the wedding planning process. Anderson will also share tips on how to have money conversations with your family and fiancé, and the top 10 ways to save on your special day. Tickets are $30 and include breakfast, class materials and a swag bag. To register, visit http://www.vagraceevents.ticketbud.com. Full text