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Case Study # 1
Business Succession Plan
Our Client consists of three members of a new LLC, two of which were in business for 10 years, the third has been a key employee for several years and now will become an equal owner. The business was very profitable and marketable due to its history, revenue, niche markets, staff, etc.
The three individuals were very motivated to create a business succession plan that would provide a very clear and smooth exit strategy for the members and its families under all circumstances. It was a priority to make certain the members and/or its families would receive a funded buyout due to retirements, death, disability, or termination. They wanted to create a tax efficient plan that would be supported by their current cash flow, would be flexible plan, and would not be a burden on remaining members.
With these factors in mind we designed a qualified defined contribution plan in which the contributions are more favorable to the three owners and would target a portion of the buyout at retirement. Installing this plan increased deductions and also enhanced employee morale with new benefits. We designed life insurance contracts to fund a buyout in a premature death and also target a portion of the buyout using the cash surrender value of the policies. Our clients took advantage of the tax deferred growth, disability waiver of premiums and flexibility. Working closely with our clients legal counsel and our tax partner at Amper, Politziner & Mattia, the policies will be owned by a partnership for better control, comforting continuity and protection to all parties.
We also designed disability buyout policies to fund a buyout upon a 12-month trigger in the shareholder agreement.
After having several meetings with client's and counsel discussing all of the various tax, legal, and financial issues a very organized plan with a clear objective was established. A very concise legal document was drafted to mirror all their goals and objectives and through various legal and funding vehicles we increased tax efficiency to offset costs that provided protection to any foreseeable tax challenges. Clients can focus on growing their business knowing they will be increasing their income value and have a business exit strategy plan in place regardless of the circumstances.
Case Study # 2
Business Planning to Deal with a Key Person
We have a manufacturing client that makes curtains in China and imports to the US. The company has a key employee that brought in a very large US retailer contract. In order to keep this key employee for the long term and also compensate her for the lucrative contract she brought in, a need arose to compensate the key employee to ensure future growth.
Originally the owner of the company wanted to give her an equity interest in the company. But instead we recommended a phantom stock plan. Phantom Stock is a deferred compensation arrangement that provides key employees of corporations the economic benefits of ownership without actual ownership. A key employee is compensated based on performance. Phantom stock allows a corporation to align employee’s performance compensation with the performance of the company’s overall business. As the value of the business increases, so does the potential for additional compensation through phantom stock to the plan participants.
We designed a program that allowed the owner to retain 100% ownership and still reward this key person. This was done by designing a program that tracks the growth of the company and rewards the employee with a credit to an account that will provide retirement income for the employee. This account is credited as the company grows. It has allowed the goals of the owner and this key employee to be aligned.
In addition recognizing the value of this key person, a key person life insurance policy was also implemented for the protection of the company in the event of a premature death.
The final outcome resulted in the company solving the problem of rewarding a key employee, while protecting the company and allowing the owner to retain 100% equity.
Case Study 3
Estate & Succesion Planning through the Advocacy ProcessTM
Amper Financial Services began working with a large private distributor, which was owned by a father and son. We started out assisting in planning for the transition of the company to the son and creating personal wealth plans as well. The son had just started his own family so college and family protection was important to him while estate and wealth accumulation was important to both father and son. Our “Advocacy Process” addressed and improved opportunities for:
- Wills, trusts and need for guardians
- Increase personal tax savings through enhance corporate benefits that the company provided while saving corporate cost that assisted in funding to grow the business.
- Protection to the owners and the company for death or disability to key employees
- Protection to the Father and Son’s families for the same
- Business succession planning
The company grew and began to receive solicitations to sell their business. It was important for us to review the cash flow needs of our client should the company be sold and income stop from the business. Through Amper’s coordinated accounting and consulting services, we:
- Provided comfort to owners regarding their personal cash flow needs before and
after the sale.
- Assisted in the negotiations to help capture the highest purchase price.
- Established a way to minimize income and estate taxes upon the sale of the company
- Developed and implemented a generational estates plan to benefit future generations.
Our clients gain invaluable wealth building insight through our Advocacy ProcessTM that allowed this client to reach their potential both while running their business and after their business
was sold.
Case Study 4
Stock Option Planning through the Advocacy ProcessTM
A public company senior executive had tax and planning issues he had wished to address. By going through the Advocacy Process, the client had the opportunity to improve his tax efficiency with stock option planning. Also, recognizing the risks associated with the high concentration of an individual stock, we were able to explore various strategies to tax efficiently diversify his assets. Through our Protection and Estate SolutionTM, we uncovered areas where he and his family needed protection from unforeseen events such as death or disability. Our process evolved to include review and improvement of the estate plan to minimize estate taxes as well as creating a retirement distribution plan to provide a sound strategy for comfortable living throughout their retirement years.
By going through our eight process steps in our Advocacy ProcessTM, our client gained a better understanding and control over their wealth. By educating them on the ramifications of their decisions our client is in a better position to reach their goals creating a retirement distribution strategy designed to provide a comfortable living throughout their retirement years.
The case studies above regard clients investing with Securities America, a registered broker-dealer, and discuss their experience as a brokerage customer. The experience highlighted is not an advertisement for investment advisory services, may not be representative of the experience of other clients, and is not a guarantee of future performance or success.
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