Case Study: Complicated business succession*

Consulting firm founding partner 

Successful partner and founder of national consulting firm providing services in the biotechnology, nuclear fuel, aerospace, financial, and government industries.

  • $30 Million Firm with 20 Year History 
  • 6 Offices Around the Country 
  • 70 Employees 
  • 4 Shareholders

Challenges 

Due to numerous mergers, the firm has a complicated ownership structure caused by a disequilibrium of share distribution. Goals to be addressed by Planning Network Partners include: 

  • Succession Planning
  • Retirement Planning 
  • Successful Exit 

Solutions 

After discovery meetings with the client, Planning Network Partners develops a strategy that combines qualified and non-qualified retirement planning to ensure timely and successful transition of ownership from the client to the rest of the firm. 

The Plan 

  • Initiate a new share issue, distributing new shares to the succeeding officers of the firm. In order to balance the compensation expense, the firm bought current shares from the client, amortizing the deduction caused by the share purchase over a 10 year period. 
  • Via share issue, create two types of income for the client: ordinary income & capital gains. 
  • Implement defined benefit plan for the client’s ordinary income. • Build a leveraged insurance portfolio using gains. 
  • Establish a charitable strategy for additional income. 

Results 

  • Transition ownership at full $ value to the founders while providing discount to purchasing officers. 
  • Build defined benefit plan on top of current profit-sharing 401K plan, enabling officers to raise retirement contributions from $50K to $600K max per individual. • Saved client $6 Million in taxes over five years. 

The many moving parts of your estate – business, heirs, real estate, philanthropy, investments – need to be orchestrated in concert to maximize your legacy and reduce your loss to estate taxes. This requires significant inter-disciplinary expertise to realize the benefits and avoid the pitfalls. Planning Network Partners is dedicated to examining this and other opportunities as part of a larger picture of your whole financial health. 

Contact Us today for expert assistance.

* Source: (1) Momentum Advanced Planning