Broker Check

What is Exit Planning?

In some ways it’s easier to describe exit planning by defining what it isn’t. Exit planning is not a transaction or an investment strategy. It’s not hiring an investment banker or buying an insurance policy. It’s not a shareholder agreement or a letter to your spouse with instructions on what to do if you aren’t around. It’s not an ESOP or a discussion with your board. It’s not endless meetings with your attorney or CPA. It’s not a reaction to an unexpected event such as death or disability or the departure of a key employee or client. Exit planning is an orderly process of managing important life transitions in order to leave your company in style, in control and on purpose.

At the end of the day the litmus test of a successful exit plan is very simple. Answer this question. Are you and your family energized and excited about what’s next for the rest of your life now that you have transitioned from being an owner to a former owner?

When should you start?

Since exit planning is a process of managing important leadership, ownership and lifestyle transitions, you should start now. The first step is to identify your strengths and weakness by measuring how exit ready you are today? By carefully measuring areas in your business that need work now, you remain focused on building enterprise value. The result is you will concentrate your time and energy to drive growth giving you greater control over the timing, terms and final price when you are ready.

My passion for exit planning comes from a long history of working in a family business, running my own company and in serving many wonderful family businesses over the past 25 years. Of the many valuable lessons, I’ve learned over the years, one thing is certain, if you don’t manage important life transitions, they will manage you. The result is losing control and leaving a mess for your loved ones.

You can do better by taking control today of your legacy and choosing to finish well on purpose.

Richard Tanner
Owner and Founder

Estate and Business Transition Planning with ESOP’s

Many successful private companies have developed unique and powerful cultures. Selling to an outsider often means the destruction of the very culture that has brought them success. Selling all or part of your company to your employees through an ESOP helps preserve your culture and can unlock special tax incentives both for the seller and the company. Through an ESOP, you can "go public privately" while creating a powerful long-term employee incentive plan.

What if you could

  • Sell your company and pay no capital gains taxes?

  • Hand over the keys of your business to people you already know, like and trust?

  • Get as much money for your business after taxes when compared to other alternatives

  • Create future opportunities for family members to participate in the business?

  • Integrate the core values that helped create your wealth into a seamless, multigenerational family wealth plan.

ESOP Repurchase Obligation Studies

Despite ongoing education at ESOP association and industry events, repurchase liability continues to be a serious threat to the growth of employee ownership in the United States. Most repurchase studies are complex reports that few truly understand. It's no wonder so few companies actually implement funding plans based on these studies. We help ESOP companies manage repurchase liability challenges through a fiduciary driven financial planning process designed to fit your budget and risk philosophy.

We believe implementing a long-term funding strategy requires a "top down" approach that includes key management and stakeholders. While current law does not require you to fund your plan or even measure the problem, we believe a well-documented strategy and funding in place reduces fiduciary risk and is simply “the right thing to do”.

Repurchase Obligation Funding 

Once you’ve completed a repurchase study and identified how much capital you want to set aside for future stock repurchases, the decisions get more interesting.

  • Where should the money be invested, in the ESOP or in the company?
  • What kinds of assets are suitable for funding long term obligations tied to the stock balances of your employees?
  • Where, when and how should company owned life insurance be considered?
  • How do we determine the right level of risk?
  • How should you monitor and maintain your repurchase obligation plan?

ESOP Investment Strategies and 1042 Investment

Unique investment opportunities are created for sellers in an ESOP transaction. If sales proceeds are invested under a carefully structured Qualified Replacement Property portfolio, all capital gains tax can be permanently deferred. With the use of special leveraging strategies including floating rate notes, we can help you develop a diversified portfolio that allows the ability to permanently defer your taxes. We have built a collaborative framework that allows us to offer providers at competitive costs and a single point of contact.

Selective Incentive Plans for ESOPs

Employee-owned companies face the ongoing need to attract, retain and motivate top executives, and often look to non-qualified performance-based incentive plans. Since family members in a leveraged ESOP generally cannot receive allocations, special "equity-like" strategies are often used to create balance and harmony. We can help you design these selective plans.

Ownership Advisors, Inc. and LPL Financial do not provide legal or tax advice. Please consult your legal or tax advisor regarding your specific situation.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.