Preparing Business Sales with Clients

By Evan Lange 9 months ago. Generosity ToolsAdvising StrategyGenerosity StrategyBusiness Sale

There are many predictions and expectations for 2021 as both people and the economy shake the pandemic. One key change that has accelerated since last year is the number of businesses that are changing owners. This could be through a sale to a third-party, succession to another family member or key employees, or the unfortunate, permanent close. Deloitte reports that 63% of the market believes domestic sales and transactions will increase, aiding the active trend of more than $10 trillion in deals since 2013.

For financial advisors, understanding these trends and what opportunities lie in the flurry of these changes for clients can be critical in aiding their life goals.

Why Businesses Close

Closely-held businesses (i.e. businesses that are not publicly traded) are usually owned by one family or a small group of individuals. There has been a major uptick in the number of these types of businesses selling in the past few years. There are several reasons for why this acceleration is likely occurring. One reason is that the owner is ready to retire or step down from the day-to-day of running a business. A good friend of mine that owns a business told me that a business owner does not have a “9-to-5” job, instead they have a “5-to-9” job. For older business owners, the current season has prompted a wind-down in business involvement.

The pandemic, political changes, which could also potentially change taxes, and the current “selling” market are also all factors to why so many businesses are transitioning right now and will continue to do so in 2021. Coresight Research has reported that almost 10,000 businesses closed in 2020, and over 1,400 have closed year to date. Whenever it occurs, many business owners experience challenges when selling their business. One of the largest of these is taxes.

Relieving the Burdens of Selling

At The Signatry, we have helped family businesses resolve tax problems when selling or transitioning their business through a charitable strategy. Many business owners and their advisors/attorneys are often unaware that the owner is able to donate the non-voting shares of their closely-held company to a public charity before the sale. This even includes S-Corporations.

By donating an interest in their business before the sale, the business owner is able to receive a large tax deduction, which lowers income taxes and potentially avoids capital gains taxes on the gift portion of the donation. It truly becomes a double benefit for both the business owner and the Kingdom.

To understand the complete benefits of using this business sale charitable strategy, The Signatry offers our Generosity Calculator to estimate the maximized savings and giving that a seller may experience.

If you have a client that is considering a business transition this year or in the next few years, give us a call at 913.310.0279 or reach out to me at elange@thesignatry.com.

Evan Lange
Evan Lange Serving as President of the Midwest Region for The Signatry, Evan works with advisors, attorneys, and business owners to minimize taxes and maximize charitable giving.

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