Business Sales Are Booming ... is Legacy Building Next?Submitted by American Endowment Foundation on November 19th, 2018
By Eric Kinaitis
A recent article captured the blistering buyout pace of American small businesses. Brokers indicate that record prices are occurring for companies in the $50 million range. A principal at a mergers-and-acquisition firm in the MidWest noted,” I’ve been doing this for 20 years, and I can say that if this isn’t the top market, it’s the top one or two in recent years. You’ve really got all the stars aligned.”
One of the factors discussed in the article for the vibrant market was recognition that the Baby Boomer generation is looking to sell the businesses that they have built over a lifetime and retire. Writer and educator Phil Cubeta regards these business owners as The Rotarians. “These are civic leaders and boosters who want to do more than take their name off the trucks, and their building, and put it on a gravestone. They want to go from ‘success to significance’ and set a good example for their heirs.”
Cubeta regards these business owners and their business sales as excellent prospects for selling some or all of their business proceeds into a donor advised fund (DAF). A DAF can be an excellent source of tax savings and wealth preservation, all while allowing the business owner to build a legacy beyond their business.
Charitable planning expert and AEF VP Laura Malone states,” Leveraging of non-cash assets through the use of charitable giving vehicles (DAFs, trusts, etc.) may be more suitable as the owner prepares to exit the business.”
“Implementing strategies prior to the sale of the business can maximize the economic benefit, because the owner is often able to avoid significant capital gains tax on their most highly appreciated asset: their closely held stock. Business owners can also give non-voting stock, or stock subject to buy/sell agreements, as well as attach rights of first refusal on stock redemptions if they are concerned about loss of control. Other assets of the business like real estate may provide just as much charitable opportunity while being a less emotional asset to gift.”
So how does the process start? Depending upon the legal structure of the business in question, listed below are some resources available that provide further guidance:
How can you lead business owner clients of yours from success to significance? At AEF, we look forward to helping you guide your clients from a lifetime of building a business to creating a legacy of giving. Contact us or call at 1-888-660-4508 to learn more.