8.23.12 How to Create Lasting Impact for Your Co-op


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Help Your Co-op Legacy Live On!

Webinar on Family Business Succession & Retirement Planning

You’ve worked hard to run your business the right way — by investing the time, effort and money to not only succeed, but also support the cooperative way of life. You may have already prepared a will covering your personal assets — but what will happen to the co-op business you nurtured all those years?

In this webinar, Gary Pittsford, CFP®, president and CEO of Castle Wealth Advisors, will provide insights into the simple steps you can take today to ensure that your commitment to the co-op cause will live on. With over 40 years of experience helping business owners in the co-op community, Gary will share proven tips and strategies for protecting the legacy you’ve worked so hard to build. Participants will:

- Learn valuation techniques for family businesses
- Get proven techniques for protecting family’s net worth
- Gain insights into succession planning (for your children and others)
- Hear expert advice on reducing income taxes and generating retirement income

Who Should Participate?

- Business owners belonging to co-ops
- Members of co-ops ages 50 to 70

Published in: Business, Economy & Finance
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8.23.12 How to Create Lasting Impact for Your Co-op

  1. 1. Family Business Successionand Retirement PlanningPresented by:Gary Pittsford, CFP ®President and CEOCastle Wealth Advisors
  2. 2. A sampling of Castle Wealth Advisors’ past and present clients:
  3. 3. Common questions: Do I transition the business to the family or an outsider? What is this business really worth? Will I have enough income in retirement? How do I protect my assets and my family? If I transfer stock to a child, what if they get divorced or die prematurely? How can I reduce the taxes? How do I start the transition/exit process?
  4. 4. Business entities Type of entity S-Corporation C-Corporation Limited liability company Family limited partnership General partnership Sole proprietorship
  5. 5. Possible valuation methods Net asset approach Capitalized earnings approach Market approach Liquidation approach
  6. 6. Discretionary cash flow for businessvaluations YoursNet profit before tax $ 100,000Add-backs: Some salary $ 40,000 Interest $ 3,000 Depreciation $ 21,000 Country club $ 10,000 Excess rent $ 25,000 One time expenses $ 20,000 Health insurance $ 12,000 401(k) corporate payment $ 2,000 $233,000
  7. 7. Family member review How long will parents/owners work? Which children will take over the business? Are there children not in the family business? Planning for in-laws, grandchildren and others Planning for key employees
  8. 8. Transition options Gift stock to the next generation (with discounts) Sell stock to the next generation (installment note, SCIN) Use of voting and non-voting stock Who will keep voting control Inherit stock in business or other entities
  9. 9. Retirement security Salary Directors fees Sell Goodwill Consulting fees Deferred compensation Sale of business Rental income Retirement plans Personal assets
  10. 10. Tax options for the buyer and seller Seller Options Buyer OptionsA. Federal Income Taxes 35% 35%B. Tax on Interest 35% DeductibleC. Tax on Recaptures 25% N/AD. Tax on Deferred Compensation 35% DeductibleE. Tax on Goodwill 15% Deductible over 15 yearsF. Tax on Non-Compete 35% Deductible over timeG. Tax on Directors Fees 35% DeductibleH. Tax on Consulting Fees 35% DeductibleI. Tax on Stock Sale 15% 0%J. Federal Gift Tax Exemption (2012) 35% - A. $13,000 per year B. $5,120,000 per lifetimeK. Federal Estate Tax Exemption (2012) 35% - A. 2009 - $3,500,000 exempt B. 2010 - $0 exempt C. 2011 - $5,000,000 exempt 35% D. 2012 - $5,120,000 exempt 35%
  11. 11. Estate documents to protect assets Will and revocable living trust (all stockholders) Titling of assets Beneficiaries Protect income for both spouses Stock Redemption Agreement Who gets voting control Pay-out to children not in the business
  12. 12. Stock redemption agreementsprovide protection Items to look for: Is there a specified price in the agreement, or is there a formula to calculate it? Is there a provision to purchase the deceased’s stock over a 5-10 year period? Is there life insurance to cover the purchase of stock at death and is it enough? In the case of disability, is there a provision to purchase the stock over time, and at what price per share? Does the document provide protection for the business and family in the event of death, divorce, personal bankruptcy, disability, termination or retirement?
  13. 13. Choosing your advisors Attorneys (Business, estate, real estate) Accountants (Business, personal) Financial Advisor (Non salesman, fee-only, fiduciary, independent) Banker (Good with family businesses)
  14. 14. Business Entity Family Members Transition •S Corp. •Parents Options •C Corp. •Children in business •Gift •LLC •Children out of business •Sell •FLP •Voting •General partnership •Non-voting •Sole proprietorship •Inherit •Non-familyRetirement Security Estate Plan Tax Options•Salary •Wills •Good for seller•Director fees •Trusts •Good for buyer•Consulting •Stock redemption•Rental income•IRA’s•Deferred comp.•Sale
  15. 15. Business Family Transition Retirement Tax Estate Entity Members Options Security Options Plans Business Owner Family Business Management Family Wealth Management
  16. 16. Gary Pittsford, CFP ®President and CEOCastle Wealth Advisorsgary@castle3.com www.castle3.com 888.849.9559 Connect with us: Gary Pittsford Castle Wealth Advisors, LLC @CastleWealth