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Larry Oxenham, senior advisor with the American Society for Asset Protection, says small business owners should ask themselves one question: If something were to happen to me today, what would happen to my company? “Every small business will pass on eventually,” says Oxenham, “either voluntarily or involuntarily.” He says that most successful businesses are built to sell, but that 70 percent of all businesses up for sale don’t sell because its legal entities are not ready.
According to Oxenham, the goal of an effective succession strategy is to put the key pieces of a business together by considering the primary threats to wealth and having an effective plan in place to address them. The primary threats to wealth include:
- Lawsuits—The key is to prevent lawsuits rather than win them by allocating your assets properly.
- Taxes—Most pay too much in taxes because they are not using a Limited Liability Company (LLC) structure effectively.
- Probate and Estate Taxes—Standard wills are not the right choice. A better idea is to funnel funds through a Revocable Living Trust with a will inside of it to eliminate the probate process.
Oxenham described specific strategies during his presentation that can provide small businesses with the keys to allocating and protecting their assets during the life of the business and when it is passed along to heirs or sold. “Small businesses need to use the same strategies as larger players,” says Oxenham. “There are many excellent strategies to use that your accountants may not be using or even be aware of. These are sophisticated, yet simple to do and they take advantage of the existing tax code.”