Managing Your Business

As the owner of a privately held business, you pour years of hard work, vision, and passion into growing your company. But what happens when an offer to buy arrives unexpectedly? Whether you’ve considered selling or not, the reality is that many business owners will face this moment at some point. The real question is: Will you be ready?

As the 250th anniversary of the American republic begins to loom less than two years away, citizens ask themselves again: What can I do this year to be “just as proud for half the money?” This article may not enable you to cut your tax bill in half, but it should provide you with key insights to discuss with your tax advisory team to help you keep more of what you make – in three different areas. 

This year business owners have had to contend with overall economic resiliency, cooling inflation, the Federal Reserve’s (Fed) pause in interest-rate hikes and the Fed’s decision in September to lower the rate by half a point . Geopolitical challenges remain as well. US politics is also an unknown.  As of this writing, we have upcoming presidential and congressional elections that could affect the expiration of the Donald Trump-era tax cuts that are set to expire at the end of 2025. But don’t let uncertainty paralyze your planning. Proactive planning is essential now.

As the end of 2025 approaches, owners of closely held businesses face a critical juncture in planning — not only for their own futures, but also for those of their families. The federal income tax and estate and gift tax cuts introduced in the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire and revert to pre-2017 levels.

In the prior issue of this newsletter, we attempted to take the air out of the most common argument owners make for ignoring the planning necessary to successfully transition their companies: They believe that their businesses aren’t worth enough to meet their financial needs. “When it is,” they claim, “that’s when I’ll think about leaving.”

Like every owner, you will one day transition your business—voluntarily or involuntarily. On that day you will want to attain certain business and personal objectives: the first (and usually prerequisite to all others) is financial security. Believe it or not, most owners do absolutely nothing to consciously plan and systematically move toward that all-important goal.

The most significant factor that impacts a business owner’s ability to leave their company - successfully or not - is creating a company with transferable business value.

One of the central truths in mergers and acquisitions (M&A) work is that buyers want to buy assets, and sellers want to sell stock.

There is an old saying that ”you cannot manage what you cannot measure”.  Therefore, most businesses run on metrics.  As business owners, we want to know how much, how soon, how efficient, how productive, how intelligent, and how to measure all the aspects of our businesses. 

As part of our commitment to keeping you informed about valuable financial opportunities, we are pleased to provide you with this insightful brief on a powerful tax provision known as the ESOP (Employee Stock Ownership Plan) tax-free rollover.

Year-end tax planning holds immense significance for business owners gearing up to transition their businesses. It offers a strategic opportunity to optimize financial outcomes, especially in the context of a business sale. 

As you decide upon the optimal transition option to meet your personal and business goals, we want to highlight the importance of developing a growth plan as you prepare for your transition.