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“For fast-acting relief, try slowing down.”
Lily Tomlin
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You are currently browsing the monthly archive for February 2010.
1. Now Google Docs will let you store all of your files online (not just your Google Doc files) – 
1. Some jobs won’t return after the recovery – 
Okay class! Eyes forward. That includes you Mr. Blumer.
Today’s lesson – How an entrepreneur can leave the business on his/her own terms, and in style.
No, Mr. Blumer! That does NOT mean sneaking out in the middle of the night and heading to some place in Belize you saw on House Hunters International! Now pay attention!
Think about the life-span of a business as being a week, and retirement being the weekend. Most entrepreneurs don’t deal with the issue of converting the value of their business to “retirement capital” until Friday afternoon at 2:30. By then, the private business owner is disposing of the business, probably taking an installment deal. The bad news is he has missed opportunities to maximize the value of his exit.
The good news is his prayer life really improves as he begs Divine Providence for the company to cash flow long enough for him to get his money out.
Thursday morning is a much better idea. Wednesday afternoon is even better.
Look my entrepreneurial students, you and the people you invited onto your bus have built value into the company. How long did that take? Probably longer than an installment deal to sell it.
The starting point is to ask three questions. What is that Mr. Blumer? No! The questions have nothing to do with the first three winners of American Idol!!!!!
First, you have to ask when do you want to leave your company? Fix a date, you can adjust it later if need be. Next, what is the total after-tax income you want from all sources, including the converted value of your company? Finally, to whom would you sell your company? To a third party, or to an insider? Don’t worry about specifics yet.
Those questions, especially the first two, zero in on the essential point of it all – your goal is not the sale of your business, it’s a new life outside of your company. So entrepreneurial students, you can retire from your company by waiting to the last minute, and do a quickly assembled sales transaction. Think: hitting the drive-thru at Taco Bell for your sit-down dinner party.
Yes, Mr. Blumer, your point about the “end results” of eating at Taco Bell is well-taken. (Sigh.)
Or, you can take some time to plan an exit on your own terms – Think: a real dinner party. Who will be on your guest list? What will be the main course? What you will have for dessert? How about after-dinner entertainment? You can dine in style, but only if you make plans. What is it, Mr. Blumer? Yes, your plans can include that “pants on the ground guy from American Idol.”
Class ::SNIFF:: dismissed!
Frank Warren III, is Senior Member at Warren & Martzin, L.L.C., Counsellors at Law, where he, and partner B. Faith Martzin, help entrepreneurial business and professional people build value, and plan successful exits. When he is not collaborating with CPA’s, business coaches and financial advisors, Frank can sometimes be found searching for the perfect lap as a kart racer and racing instructor. You can email him with questions, comments, and invitations to fine dining at frank.w@warrenandmartzin.com or kartwriter83@gmail.com.
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I know it’s a crass title, but this TTT speaks of the funkiness of our laws. The estate tax, or death tax on your estate when you die, expired in 2009 (but not the gift tax, which is often tied to the estate tax). And it’s currently scheduled to come back on January 1, 2011. Weird. So if you are going to die, 2010 is the year to do it (especially if you are rich and you have heirs).
Break it down, homey:
Pre 2010: the Estate Tax Rate was 45% with a $3.5 Million exemption.
Post 2010: the Estate Tax Rate will be 55% with $1 Million exemption.
Thoughts:
-No way Congress is going to let the Estate tax lapse – too much cash in it, so expect them to establish something and make it retroactive back to January 1, 2010.
-I’ve heard that the Republicans may have enough votes in the Senate to get a $5 Million exemption and a 35% tax rate instituted. That would be good news for hefty estates everywhere.
-There is a twist to the estate tax in 2010: the “stepped up basis” rules do not apply in 2010. That is, when someone dies, the heir gets a stepped up basis in the inherited property. They get to consider the basis in the property they inherit to be valued on the date of death of the decedent. That means they won’t pay as much gain on the subsequent sale of the property after inheriting it. In the current law, that stepped up basis has gone away. Not good.
Interesting to see where all of this will go, but you can be sure – there will be changes. Anything you’ve heard? Leave it in the comments.
Thanks, Jason M. Blumer, CPA
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