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      Proposed IRS Regulations WOULD Increase Taxes For Many FAMILY Businesses

      Family Business, Business Valuations, Valuation

      IRC Section 2704 Update

      As discussed in last month’s newsletter, proposed changes by the IRS to Section 2704 of the Internal Revenue Code would increase taxes for many family businesses.  The proposed regulation would effectively eliminate valuation discounts when transferring or gifting ownership interests to family members.  As currently written, the regulation would impose a de facto 25 to 50 percent “stealth” tax increase on each transfer or gift, and severely hamper many of these businesses.

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      External Business Transitions – The Preparation and Decision Phase

      Valuation

      PREPARING YOUR BUSINESS FOR EXIT (OR GROWTH)

      Last month’s newsletter touched on the Discovery Phase of planning for a business transition, which consists of getting a grasp on the nature of your current situation and what you want to immediately do about it. The next phase of the process is the Preparation Stage. In this stage, business owners will move beyond iterative action plans and focus on strategic personal and financial planning, and then focus on business improvements, including de-risking the business. The final stage of the process is the Decision Stage. At this point, the business owner has a clearer understanding and can make a sound personal and financial decision of whether to exit (or grow) the business.  

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      External Business Transitions - The Discovery Phase

      Valuation

      EXTERNAL BUSINESS TRANSITIONS – The Discovery Phase

      In general, an external business transition (or sale) is structured as either a transfer to a charitable trust or a sale to a third party. As we have outlined over the past few months, it is important to make preparations before selling any business. Having a plan will ensure that the business owner has enough information to make a sound financial decision and maximize value, minimize risk, and maintain control of the business. According to the Exit Planning Institute the planning process has three phases:  the Discovery Phase, the Preparation Phase, and the Decision Phase. This month's newsletter focuses on the Discovery Phase.      

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      Internal vs. External Transitions – Key Differences

      Valuation

      As we touched on previously, there are a variety of methods under two business transition strategies:

      Internal Transitions

      • Transfer the business to family
      • Transfer to co-owners
      • Sell the business to your employees

      EXTERNAL TRANSITIONS

      • Transfer the business to a charitable trust
      • Sell your business and retire
      • Sell a percentage to a private group and continue
      • Go public
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      VALUATION SPRING CLEANING – Internal transitions

      Valuation

      Transitioning a family-owned business is not something that happens overnight. Succession planning, if done correctly, really never stops. According to Peter G. Christman, author of The Master Plan, Exit Strategy for Successful Business Owners, there are number of potential ways to transition your business:

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      VALUATION SPRING CLEANING

      Valuation

      Liquidation As An Exit Strategy

      Selling a company is often the most obvious exit strategy choice, but buyers can be hard to come by and may not be on your timetable. If this is the case, liquidation may be the only viable option. Liquidation is defined as the conversion of assets to cash by selling them to a user and/or consumer. This can mean inventory, as well as equipment and even intellectual property and intangible assets, such as brand names.

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      Succession Planning & Business Valuation

      Valuation

      Valuation is Crucial to Succession Planning

      Business owners spend a lifetime building their businesses.  And when it comes to succession, they face the difficult decision of whether to sell, close, or pass down the business to family members.  Passing down the business involves several complicated issues, such as how to logically divide the family business, allocate value, and tackle complex tax issues.

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      Considering Valuations in a Shark Tank

      Valuation

      By Albert A. Lazo, MBA, CVA

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      Why You Need a Valuation

      Valuation

      By Albert A. Lazo, MBA, CVA


      If you are over 45 and own a business, you need a business valuation.  As a business owner, the value of your business is a major factor in your retirement game plan.  There are three main exit strategies:

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