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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
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Family Business Succession and Retirement Planning
Presented by:Gary Pittsford, CFP®
President and CEOCastle Wealth Advisors
A sampling of Castle Wealth Advisors’ past and present clients:
Common questions: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?
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?
Business entitiesBusiness entitiesType of entity
S-Corporation
C-Corporation
Limited liability company
Family limited partnership
General partnership
Sole proprietorship
Type of entity
S-Corporation
C-Corporation
Limited liability company
Family limited partnership
General partnership
Sole proprietorship
Possible valuation methodsPossible valuation methods
Net asset approach
Capitalized earnings approach
Market approach
Liquidation approach
YoursNet profit before tax $ 100,000
Add-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
YoursNet profit before tax $ 100,000
Add-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
Discretionary cash flow for business valuationsDiscretionary cash flow for business valuations
Family member reviewFamily 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
Transition optionsTransition 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
Retirement securityRetirement security
Salary
Directors fees
Sell Goodwill
Consulting fees
Deferred compensation
Sale of business
Rental income
Retirement plans
Personal assets
Tax options for the buyer and sellerTax options for the buyer and seller
Seller Options Buyer Options
A. 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 yearB. $5,120,000 per lifetime
K. Federal Estate Tax Exemption (2012) 35% -A. 2009 - $3,500,000 exemptB. 2010 - $0 exemptC. 2011 - $5,000,000 exempt 35%D. 2012 - $5,120,000 exempt 35%
Estate documents to protect assetsEstate documents to protect assets
Will and revocable living trust (all stockholders)Titling of assetsBeneficiariesProtect income for both spousesStock Redemption AgreementWho gets voting controlPay-out to children not in the business
Stock redemption agreements provide protectionStock redemption agreements provide 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?
Choosing your advisorsChoosing your advisors
Attorneys(Business, estate, real estate)
Accountants (Business, personal)
Financial Advisor (Non salesman, fee-only, fiduciary,
independent)Banker (Good with family businesses)
Family Members• Parents• Children in business• Children out of
business
Transition Options• Gift• Sell• Voting• Non-voting• Inherit• Non-family
Estate Plan• Wills• Trusts• Stock
redemption
Business Entity• S Corp.• C Corp.• LLC• FLP• General
partnership• Sole
proprietorship
Retirement Security• Salary• Director fees• Consulting• Rental income• IRA’s• Deferred comp.• Sale
Tax Options• Good for seller• Good for buyer
Business Entity
Transition
Options
Business Owner
Family Member
s
Retirement
Security
Tax Option
s
Estate Plans
Family Business Management
Family Wealth Management
Gary Pittsford, CFP® President and CEOCastle Wealth Advisors
[email protected] www.castle3.com 888.849.9559
Gary Pittsford, CFP® President and CEOCastle Wealth Advisors
[email protected] www.castle3.com 888.849.9559
Gary Pittsford
Castle Wealth Advisors, LLC
@CastleWealth
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