How to Sell Your Business Tax-free at the Price You Want & Receive Tax-free Retirement Income

A New Way to Solve Old Problems in the Sale of a Business -- Sell to the person you want at the price you want with unprecedented tax and estate planning benefits. This new program secures your business from lawsuit liability and gives new liquidity
 
March 6, 2008 - PRLog -- A New Way to Solve Old Problems in the Sale of a Business
by:  Leo J. Vidal, JD, MA, CPA

What are the biggest obstacles to closing the sale of a business?  In my experience it comes down to not just price but the buyer’s willingness and ability to pay what the seller wants to receive in the sale.
There is a new turnkey business sale program available that solves this problem and provides business sellers a nearly tax-free sale of their businesses.  We call this program Equity Access.  Once a buyer is identified, the deal is done.
Top Three Problems the Equity Access program solves:
Security: replaces an installment sale of the business with a secure asset for retirement and estate planning
Ownership transition: provides economic efficiencies in transitioning business ownership
Financing transitions: provides easy access to financing business ownership transitions without limiting the new owner’s ability to finance ongoing working capital needs

Monetize the value of the business
Equity Access is a way for the business owner to monetize the value of the business, i.e., to turn a non-liquid asset into money.   This money can then be used to provide a secure financial future for the business owner and his or her family.
The unique features of Equity Access include:
o   superior turn-key lending terms,
o   customized tax planning
o   customized retirement planning
o   customized estate planning
o   the best way to efficiently access business equity for succession planning and acquisition purposes


Financing the Sale
Financing of the sale, as well as retirement funding and estate transfer planning comes from one of the world’s largest insurance companies.  Insurance companies have the largest pools of investment money in the world, and can give the most favorable financing terms.  
Insurance programs maintain the most favorable tax benefits possible under the U.S. tax code.  This is why the sale can be tax-free, the investment interest earned on sale proceeds is tax-free, distributions during retirement are tax-free, and the amounts received by heirs are tax-free.
Summary of Benefits
To summarize, the amazing features of this lending program include:
•   No down payment is required for the loan
•   There is no artificial limit on the loan amount
•   The loan is interest-only
•   The loan need never be paid back (it’s non-callable) until the owner dies
•   All loan proceeds are invested in tax-free investments with over a 10% historical average return
•   All withdrawals from investment accounts during retirement are tax-free
•   The heirs receive tax-free inheritances in the amount you decide
•   The value of the business is exempt from creditors
•   Interest rates (currently 7%) are below market rate for commercial loans
The implications of this in the context of business succession planning are unprecedented.  There is no longer a need to find outside financing.  You can sell your business to the person or persons best able to make the business successful, not those with the most money.  (Such as a great manager you have, or a promising young professional in your field.)
Sell to Any Interested Buyer
Because the Equity Access program means a business owner can sell his business to any buyer, including those with no capital and no borrowing capacity, it is easier to both find a buyer and to close the sale.    It is a way to sell a business to an interested buyer who could not otherwise qualify for the loan.  In fact, for some businesses, this may be the only way that the owner can even sell the business at all.
In advance of a sale, the seller acquires the loan that will finance the sale, thereby monetizing the value of the business equity.  Thus it is similar to a reverse mortgage on a home.  Your non-liquid asset is made liquid, so you can let it work to provide you financial security.
Interest-only Loan Need Never be Repaid
The loan never needs to be paid back, although the interest must be paid each year.  You can have the buyer repay the loan as the condition of purchasing the business.  In fact, the seller is in complete control of determining the amount and timing of purchase payments made to him by the buyer.  It can be a low or no downpayment purchase.  It can spread down payments over a period of years.  It can require the buyer to pay only loan interest for the first few years, and then principal also after that.
No Business or Personal Assets are Used as Collateral
It is important to understand that no business assets and no assets of the buyer need to be used as collateral in an Equity Access transaction.  This makes more capital available to operate the business, which is invaluable and important to the future success of the business.  The only collateral for the loan is the investment/insurance contract with the lending insurance company.
Sale Proceeds are Insured Against Loss
The proceeds of the loan are invested in tax-free, insured investments, which are both guaranteed against loss and indexed to stock market gains or fixed rates (currently 5.2%).   Because investments can earn stock market returns with no risk of loss, they have earned a historical rate of return in excess of 10%.
Because of the above, the seller and his or her family are protected and have more security available than under other types of business sale transactions.
Sale Proceeds are Not Subject to Income Taxes
It is also important to understand that the sale can be structured to be tax-free to the seller.  Thus the investment accounts not only earn tax-free interest, but the amount invested is the full value of the business, pre-tax.  This value is set by the seller, and because of the special loan terms, the buyer is willing to pay more than in a normal sale.  Thus the seller receives both a higher price, and a much higher net amount, after taxes than a normal business sale.
This program will have the most appeal in situations where the seller is willing to forego a cash transaction in order to receive higher after-tax wealth.
This program is especially useful where there is an interested buyer who really wants the business but is unable to come up with the cash and the financing to pay the owner what the business is worth.

Management and Family Sales
In addition to a professional practice sale, the Equity Access program is ideal for a sale to existing employees or to family members.  Usually the best people to continue to operate small businesses in a profitable way are the existing management teams.  Yet they usually don’t have the money to buy the business.  The Equity Access program provides a way for a sale to existing management employees without them having to borrow money or tie up company assets as collateral.  The seller of the business determines how much of a downpayment is to be made (if any) and when it is paid.
Many owners would also like to sell the business to children or other family members who do not have the capital or borrowing capacity either.  The Equity Access program provides a way to finance the sale of a business to a family member (or to anyone).

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About Senior Information Services:  Providing unique solutions to the financial issues of retirement and financing the sale of a business.

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