The pros and cons of turning your home into a rental
If you’re buying a new home, you may have thought about keeping your current home and renting it out. In March, average rents for one- and...
2 min read
L&H CPAs : Jan 30, 2019 10:05:01 AM
For example, you need to develop an exit strategy so that taxes don’t trip you up when you retire or leave the business for some other reason. An exit strategy is a plan for passing on responsibility for running the company, transferring ownership and extracting your money from the business.
When a business has more than one owner, a buy-sell agreement can be a powerful tool. The agreement controls what happens to the business when a specified event occurs, such as an owner’s retirement, disability or death.
Among other benefits, a well-drafted agreement:
You can pass your business on to family members by giving them interests, selling them interests or doing some of each. Be sure to consider your income needs, the tax consequences, and how family members will feel about your choice.
Under the annual gift tax exclusion, you can gift up to $15,000 of ownership interests without using up any of your lifetime gift and estate tax exemption. Valuation discounts may further reduce the taxable value of the gift.
With the gift and estate tax exemption approximately doubled through 2025 ($11.4 million for 2019), gift and estate taxes may be less of a concern for some business owners. But others may want to make substantial transfers now to take maximum advantage of the high exemption. What’s right for you will depend on the value of your business and your timeline for transferring ownership.
If you don’t have co-owners or want to pass the business to family members, other options include a management buyout, an employee stock ownership plan (ESOP) or a sale to an outsider. Each involves a variety of tax and nontax considerations.
Please contact us to discuss your exit strategy. To be successful, your strategy will require planning well in advance of the transition.
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If you’re buying a new home, you may have thought about keeping your current home and renting it out. In March, average rents for one- and...
If your business doesn’t already have a retirement plan, it might be a good time to take the plunge. Current retirement plan rules allow for...
If you operate a business, or you’re starting a new one, you know records of income and expenses need to be kept. Specifically, you should carefully...