“One difference between death and taxes is that death doesn't get worse every time Congress meets”.
Will Rogers
Confused about the federal estate rules and regulations? Wonder what the tax rules are? Did George Steinbrenner (owner of the New York Yankees) get it right when he died in 2010…should he have waited? We thought we would recap the current estate and gift tax rules. Note, they only apply for 2011 and 2012 and will change again, maybe. Here you go:
1. The minimum federal estate and gift tax rate is 35%,
2. The “unified tax credit exemption equivalent” is $5m … a fancy way to say that up to $5m in assets can be passed on to heirs either during your lifetime and at death (hence the term unified) without federal taxation,
3. The generation-skipping transfer tax rate is 35% with a $5m generation skipping transfer tax exemption. Many individuals (grantors) who might otherwise leave their entire estates outright to their children will instead allocate their generation-skipping exemptions to “generation-skipping transfer tax exempt trusts” for their children and grandchildren. Potential benefits include:
a. the trust will escape all transfer taxes when the children die and will pass tax-free to the grandchildren,
b. the trust may be protected from the claims of creditors and, to some degree, from claims of ex-spouses. Had the trust property been left to the children outright, the property would be subject to such claims. In some states, property acquired by gift or inheritance from a third party is not subject to division in divorce proceedings and therefore, would not be subject to claims by an ex-spouse,
4. The maximum estate tax unified credit between spouses is now “portable” meaning that a surviving spouse can elect to use any unused portion of the estate tax credit of the predeceased spouse (currently $5m). so, with the right planning, married couples can effectively shield up to $10m in assets from federal estate and gift tax,
5. Estate tax deferral – payments of estate tax attributable to the value of a closely-held business can be deferred for up to 5-years.
Remember, these rules only apply for planning during 2011 and 2012. After that, the rules “sunset” (we think that’s a cute phrase) and revert to the 2001 rules.
Article Authored by Ed Davis. edavis@ciharvest.com
U.S Treasury Circular 230: Any tax advice included in this written or electronic communication was not intended or written to be used, and cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency, nor can this be used for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed herein.
Monday, July 11, 2011
Wednesday, July 06, 2011
Year to Date Commercial Construction Contracts are Down
Commercial Construction contracts for future work through May 31, 2011 are down about 10% from this time in 2010 per McGraw Hill Construction. More info http://tiny.cc/pzgb5.
Monday, July 04, 2011
Lending Update in 2011
By John Gibson, Partner
We are hearing that banks say they have money and want to lend it but they can't find enough qualified borrowers. At the same time, borrowers who are looking for loans say their banks are just paying lip service, looking for a way to turn them down.
Who is right? In a way, both are.
Uncertainty and fear have produced cautious bankers. 2011 is a little better than 2010 and much better than 2009. Banks are tip-towing back in, but they are fearful. They are afraid for many reasons. Fear of the unknown. Fear of loss. Fear of federal and state regulators glaring over their shoulders and writing down loans. Even Fear of losing their jobs.
What can you do to improve your chances in this environment?
It's back to basics. Start with the 3 C's; Character, Credit, and Collateral. It takes all three legs for the stool to stand. You have one first impression to win over the banker. Don't give them an excuse to turn you down. You must have a complete loan package. If you don't it will be set aside and you lose critical momentum. Point out the positives and explain the negatives. Answer before asked. All loan proposals have negatives. Letting them know that you aware of yours, not trying to hide them and what you are doing to correct them scores big character points with the lender.
In short, be prepared, stay positive but realistic and don't forget the three C's.
We are hearing that banks say they have money and want to lend it but they can't find enough qualified borrowers. At the same time, borrowers who are looking for loans say their banks are just paying lip service, looking for a way to turn them down.
Who is right? In a way, both are.
Uncertainty and fear have produced cautious bankers. 2011 is a little better than 2010 and much better than 2009. Banks are tip-towing back in, but they are fearful. They are afraid for many reasons. Fear of the unknown. Fear of loss. Fear of federal and state regulators glaring over their shoulders and writing down loans. Even Fear of losing their jobs.
What can you do to improve your chances in this environment?
It's back to basics. Start with the 3 C's; Character, Credit, and Collateral. It takes all three legs for the stool to stand. You have one first impression to win over the banker. Don't give them an excuse to turn you down. You must have a complete loan package. If you don't it will be set aside and you lose critical momentum. Point out the positives and explain the negatives. Answer before asked. All loan proposals have negatives. Letting them know that you aware of yours, not trying to hide them and what you are doing to correct them scores big character points with the lender.
In short, be prepared, stay positive but realistic and don't forget the three C's.
Friday, June 24, 2011
Exit Planning Facts: The Reality of Leaving Your Business
By Carol Coughlin, President, BottomLine Growth Strategies
Exit Planning Facts:
The Reality of Leaving Your Business
Of the approximately 22 million businesses operating in the U.S. today, only a very small percentage will ever go public. In fact, only a fraction of one percent.
For business owners in that fraction, the future is clear. An IPO will enable the owner's exit from the business, secure retirement or next venture.
But for the rest of us, the statistical truth is this: No matter how successful your business becomes, an IPO will not likely be in the cards.
The vast majority of business owners need a concrete Exit Plan. And this is where another surprising fact comes into play: Most business owners equate their exit from their business with their death. Therefore, owners typically seek insurance solutions to address the issue.
While we advocate purchasing insurance in a number of scenarios, the problem is that just purchasing insurance to address a handful of issues that will arise in the event of your death is NOT exit planning. It's business contingency planning. And there's a difference.
While contingency planning puts stop-gap measures in place for "What if" scenarios, Exit Planning puts long-term action steps in place for "What IS" your desired result - not various scenarios, but what you actually want and need to leave your business in a conscious and fully planned manner.
So, how do you plan your exit? What do you need to do to exit consciously, seamlessly and with greater personal wealth?
Quite simply, you need to increase the value of your business and position it to sell. Interestingly, the best way to do that is to:
Run your business like you might sell it at any moment.
Here are just a few ways to keep your business's financial picture in sell-ready condition:
BottomLine's Run Your Business to Sell Strategies:
#1: Close your books and records on a timely basis. Close your books no later than the 15th day following the end of the month so you have timely feedback on trends. Guard against errors like duplicate recording. Compare actuals to budget, taking time to understand variances.
#2: Keep books and records in generally accepted accounting principles (GAAP), as well as on a cash basis. Many companies only review financial reports on a cash or tax basis. This can be deceiving in companies where deposits are paid in advance, for example. GAAP accounting matches revenue with work effort and is understood by everyone, including bankers and investors.
#3: One-time expenses and expenses for start-up programs and businesses should be separately identified. Let's say that instead of buying into a new territory, you grow organically. You will need to hire consultants and employees and have other expenses before you make your first dollar. These costs should be isolated in your internal reporting so that you can tell how the underlying business is doing without these non-repeatable costs.
#4: Compare each year's performance to the prior year's. Explain the variances because this increases the probability that you'll remember the specifics when you sell.
#5: Regularly compare your company's performance. Many privately held companies fly blind. But to sell your company, you must know where it stands against other opportunities your buyers might have.
#6: Know your business financials inside and out. If you wait until a due diligence process prior to a sale to review your financials, you may learn that your business is not attractive enough to fetch a good price. Know financials in advance to avoid unpleasant surprises.
#7: Don't be satisfied with mediocre results.
Buyers will not pay top dollar for mediocre financials and you shouldn't tolerate sub-par results either. Make sure your company is attractive by regularly evaluating results and adjusting how you operate.
--------------------------------------------------------------------------------------
Do you run your business like you're going to sell? Do you know how you plan to exit your business? BottomLine Growth Strategies CFO Guides have 20+ years of experience in corporate turnarounds, growth strategies and helping companies acquire and sell successfully. For more Information on Carol and BottomLine Growth Click Here
Exit Planning Facts:
The Reality of Leaving Your Business
Of the approximately 22 million businesses operating in the U.S. today, only a very small percentage will ever go public. In fact, only a fraction of one percent.
For business owners in that fraction, the future is clear. An IPO will enable the owner's exit from the business, secure retirement or next venture.
But for the rest of us, the statistical truth is this: No matter how successful your business becomes, an IPO will not likely be in the cards.
The vast majority of business owners need a concrete Exit Plan. And this is where another surprising fact comes into play: Most business owners equate their exit from their business with their death. Therefore, owners typically seek insurance solutions to address the issue.
While we advocate purchasing insurance in a number of scenarios, the problem is that just purchasing insurance to address a handful of issues that will arise in the event of your death is NOT exit planning. It's business contingency planning. And there's a difference.
While contingency planning puts stop-gap measures in place for "What if" scenarios, Exit Planning puts long-term action steps in place for "What IS" your desired result - not various scenarios, but what you actually want and need to leave your business in a conscious and fully planned manner.
So, how do you plan your exit? What do you need to do to exit consciously, seamlessly and with greater personal wealth?
Quite simply, you need to increase the value of your business and position it to sell. Interestingly, the best way to do that is to:
Run your business like you might sell it at any moment.
Here are just a few ways to keep your business's financial picture in sell-ready condition:
BottomLine's Run Your Business to Sell Strategies:
#1: Close your books and records on a timely basis. Close your books no later than the 15th day following the end of the month so you have timely feedback on trends. Guard against errors like duplicate recording. Compare actuals to budget, taking time to understand variances.
#2: Keep books and records in generally accepted accounting principles (GAAP), as well as on a cash basis. Many companies only review financial reports on a cash or tax basis. This can be deceiving in companies where deposits are paid in advance, for example. GAAP accounting matches revenue with work effort and is understood by everyone, including bankers and investors.
#3: One-time expenses and expenses for start-up programs and businesses should be separately identified. Let's say that instead of buying into a new territory, you grow organically. You will need to hire consultants and employees and have other expenses before you make your first dollar. These costs should be isolated in your internal reporting so that you can tell how the underlying business is doing without these non-repeatable costs.
#4: Compare each year's performance to the prior year's. Explain the variances because this increases the probability that you'll remember the specifics when you sell.
#5: Regularly compare your company's performance. Many privately held companies fly blind. But to sell your company, you must know where it stands against other opportunities your buyers might have.
#6: Know your business financials inside and out. If you wait until a due diligence process prior to a sale to review your financials, you may learn that your business is not attractive enough to fetch a good price. Know financials in advance to avoid unpleasant surprises.
#7: Don't be satisfied with mediocre results.
Buyers will not pay top dollar for mediocre financials and you shouldn't tolerate sub-par results either. Make sure your company is attractive by regularly evaluating results and adjusting how you operate.
--------------------------------------------------------------------------------------
Do you run your business like you're going to sell? Do you know how you plan to exit your business? BottomLine Growth Strategies CFO Guides have 20+ years of experience in corporate turnarounds, growth strategies and helping companies acquire and sell successfully. For more Information on Carol and BottomLine Growth Click Here
Friday, May 13, 2011
Construction & the M&A Market (under $25 million revenues)
This is the 1st in a series of short articles and updates about the construction and housing markets that we will be writing. We have two goals: 1/ provide a summary of industry happenings and 2/ describe the impact these changes have had/are having on business owners who are selling or “exiting” their businesses. We would love to hear your thoughts, comments or questions. We want this to be both light and informative, and we appreciate your feedback. Thanks.
Let’s get started. Our top-10 comments and observations are as follows:
Let’s get started. Our top-10 comments and observations are as follows:
- The housing market is (still) “stuck.” New starts for 2011 are 44% below the 2000 levels;
- 1st Qtr 2011 sales are flat, and housing inventory, expressed in number of months on hand, has increased;
- Regional/small builders face fierce competition from national builders;
- Homeowners have less cash to spend on home improvements and expect contractors to “do the same work for less money;”
- Contractors saw signs of recovery during the 1st Qtr of 2011, but are concerned with some leading indicators showing the momentum could fade by the 4th Qtr;
- Some optimism that new regulations for “green” applications could drive a large part of the recovery;
- Acquisition Advisors Outlook reported that business owners selling their businesses during 2008-2010 got caught in a “sluggish” market (some of the owners we talked to described it differently…). Deal activity in 2009 was less than 2008's results with some uptick in activity noted during the 4th Qtr of 2009;
- For the 6 months ranging from 11/10 – 4/11, stats published by MergerNetwork indicated that, based on the number of active buyers and sellers looking for deals, we could be returning to a more stable buy/sell market;
- A survey of construction owners reported that 40% believed there would be an increase in buy/sell activity in 2010 and 2011; and
- Buyers with capital (i.e., “financial buyers”) are aggressively hunting for acquisition opportunities.
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