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.
Henrico's Lewis Ginter Botanical Garden is one of only 20 gardens in North America nominated for USA Today’s “10Best Reader’s Choice” contest for Best Public Garden.
The 20 public gardens nominated are:
• Bloedel Reserve, Bainbridge Island, Wash.
• Brooklyn Botanic Garden, Brooklyn, New York
• Buthcart Gardens, Victoria, B.C.
• Callaway Gardens, Pine Mountain, Ga. > Read more.
Photo by Patty Kruszewski/Henrico Citizen 02/24/2014
The Fifth Annual Henrico Police Athletic League (PAL) Award Banquet, held Feb. 6 at The Cultural Arts Center at Glen Allen, honored HPAL’s top volunteers and employees, including Morgan Lewis, Youth of the Year; Dale Alexander, Volunteer of the Year; Lowell Thomas, Employee of the Year, and Victor Williams, Board Member of the Year. Also honored for their support were Jim and Christi Dowd of Richmond BMW and Josh Davis of Henrico County Public Schools Pupil Transportation.
Keynote speaker for the banquet was Tim Hightower, a University of Richmond alumnus and former NFL running back. Hightower was introduced by Billy McMullen, former NFL player and a Henrico PAL board member. > Read more.
The Pocahontas Chapter of the National Society Daughters of the American Colonists, based in western Henrico, last year donated more than $1.3 million worth of manufacturers coupons to U.S. military personnel overseas. Throughout 2013, members and friends of the chapter clipped 952,349 manufacturers’ coupons valued at $1,350,630, which Program Chairman Carole Featherston shipped to U.S. military bases abroad. Military personnel can use the coupons when shopping in base stores.
The National Society Daughters of American Colonists is a women’s genealogical and patriotic society whose members are descended from a man or woman who rendered civil or military service in any of the American colonies prior to July 4, 1776. > Read more.
If you’re looking for a date night with someone special, Henrico is the place to be! Check out a classic 90s movie, “My Girl,” at Henrico Theatre; Circa, an innovative circus from Australia, will dazzle at the University of Richmond; and celebrate TGIF at Keagan’s Restaurant where the PJ Bottoms Band is performing. For all our top picks this weekend, click here! > Read more.
Abstract paintings of Inge Strack (pictured) are on display through March 9 at the Gumenick Family Gallery at The Cultural Arts Center at Glen Allen. Strack, a Chestefield painter of German origin, often paints in bold colors with a deep sense of emotion, focusing on brushstrokes, texture and form to find a balance. Strack’s painting is routed in the European tradition of expressionism but has found its own, unique language in following the American dream.
“I am not attempting to abstract the physical world," she said. "I draw my subject matter from inside of myself hoping to create a constant conversation between the viewer and the painting, especially since abstracts do not seem to answer but ask.” > Read more.
Do you play pickleball? Learn more about this oddly-named but fun-to-play sport tomorrow! Though it’s still pretty chilly outside, you can get a jump start on spring at the Richmond Home and Garden Show or at a workshop on raised bed gardening at Lavender Fields Herb Farm. For all our top picks this weekend in Henrico, click here! > Read more.
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