After the sale of your Business…

If you have sacrificed to start and build a successful business,
then someday you could be fortunate enough to sell it for a
rewarding profit.

Careful decision making and taking the appropriate actions
could possibly reduce your tax burden, preserve the proceeds
of a sale, and help ensure that your family’s needs are met well
into the future. If a business sale is in the works, it may be time
to reexamine the following issues.

How will the tax code treat you?
There are many ways to structure a business sale, so consider
how you might reduce the taxes you will owe on the proceeds.
Currently, capital gains receive more favorable tax treatment
that regular income. Whether you are paid in cash or company
stock, your tax advisor can suggest tax efficient ways to
structure the deal.

Every year that you receive payments, it’s a good idea to
make the maximum tax-deductible contributions to your IRAs
or other retirement savings in order to reduce your taxable
income.

Take steps to protect the proceeds of the transaction.
Once you have significant assets held in your name, your
personal exposure to liability risk grows. In the event of an
accident or any other unfortunate occurrence, it is crucial to
have adequate primary and umbrella liability insurance in place.
As for investing your windfall, it’s generally best to employ a
strategy based on your age, financial goals and tolerance for
risk. Your holdings should be diversified across several asset
classes – namely stocks, bonds, cash accounts, and even real
estate. The sheer number and variety of investment vehicles
can be daunting, so during this heady transition period, it may
be helpful to seek the guidance of a knowledgeable financial
professional. Diversification does not guarantee against loss; it
is a method used to help manage investment risk.

Review and adjust your estate plan in light of the sale.
It’s likely that you now have additional assets and/or
property to address in your will. You might consider
setting up a trust to help reduce estate taxes, avoid the
lengthy probate process, and give you more control
over how your assets will be distributed in the event of
your death.

The use of these approaches can involve a complex
web of tax rules and regulations. You should consider
the counsel of an experienced estate planning
professional before implementing such strategies. A
lucrative business sale could possibly produce the
single-greatest monetary gain of your lifetime. Thus,
there may never be a more important time to adjust
your finances based on your new and improved
financial situation.