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From Business, Inc., to Family Wealth, LLC

Gary Pittsford, CFP®

Director of Financial Education

Last Updated
October 31, 2022
An adult son and his senior father talking about the family business over coffee

How to Protect Your Post-Sale Business Assets

As the owner of a closely held business, you’ve likely spent the last 20-plus years building up a comfortable net worth in your privately held company. If you’re planning to sell your company, there are several considerations that must be addressed. In the next two to three years before the sale, a lot of important planning work must be done.

To get started, it’s important to engage an advisory team consisting of a business attorney, an accountant and an independent financial advisor. These three individuals will help you understand your options for selling your business, which may include selling to a family member, key employees or someone else within your industry.

From there, you’ll want to work with your advisory team to prepare two separate asset transition plans.

The first plan should outline the most efficient way to sell your company to the buyer you have chosen, minimizing taxes and maximizing the amount of cash that can be transferred to you and your family.

The second plan is designed to help you maximize your retirement income and protect as much net worth as possible in future years. This may break out as follows based on the combined net worth of you and your spouse:

  • $1 million to $4 million – Consider setting up investment accounts in the name of a personal trust.
  • $4 million to $10 million – You may want to form a limited liability company (LLC) or family limited partnership (FLP) to hold some of your liquid assets.
  • More than $10 million – Think about establishing a grantor annuity trust, private family foundation, charitable remainder trust or other vehicle that can help you reduce income taxes in the future and maintain your family’s net worth.

Whatever direction you move, remember that transitioning assets to your significant other and future generations can get complicated. You want an asset allocation that provides you with the income and safety you’re looking for, but you also should educate your inheritors on the types of plans you’re developing and why. You’ve spent many years building up your company to be a profitable business, which is good for your family, your employees and your community. Now, planning for your transition of assets is vitally important.

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This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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