Beware of Business Financial Hazards Part 1: Unexpected Death of the Business Owner

Lost Income from the Unexpected Death of the Business Owner: Can Your Family and Your Business Succeed without You?

#findyourcompass #businessowner #businesssuccession #familybusiness

The Business Owner

The owner is the heart of a business. Without the leadership, experience, relationships, and knowledge of the owner, many companies would struggle to continue to succeed. If something terrible or unexpected happened to you would your spouse or children be able to run the business as well as you had? Do they want to run it? Without you could your business provide adequately for them? If business income dried up, how long would savings replace income before your family would need to sell business assets or your home? What assets would you want them to sell first (car, home, inventory, equipment, real estate, etc.)?

Let’s Look at the Numbers:

Let’s look at what it could take for the owner of ABC to generate $1 million of cash from the business (for their family or for use by the business itself).

$1,000,000 cash (after taxes & expenses) ÷ 70% (1 – tax rate) $1,428,571 (pre-tax profits) ÷ 9% (profit margin) $15,873,015 (company revenue)

In other words, a company generating that much revenue would have $1 million left over after paying 91% in expenses and 30% in owner’s taxes. Another way of looking at it is that it would take about $15 of revenue to create $1 of after-tax money for the family. And all of this would have to be accomplished at a time when the services, skills, and contributions of the deceased owner are no longer available!?

As an alternative to hoping the business can produce the level of revenue required to provide for your family, what if you could set up a strategy that provided $1 million (or more) to your family, if you passed away unexpectedly, even if business revenue totally disappeared???

You Have Options:

What if that $1 million could be provided to your family totally income tax free? What if you could fund such an arrangement for the cost of one (or less) of the employees on your payroll? What if you could set it up to only need funding for a fixed, relatively short number of years? What if you could eventually get all your dollars back? What if there was a way to create the dollars needed in the future for pennies on the dollar today? What if the arrangement could be funded using low yielding cash accounts, to possibly improve the growth of those assets, while still enjoying the other benefits noted above???

Many business owners haven’t considered how much revenue it takes to create after-tax, afterexpenses cash for their families. How much revenue would it take for your business to provide for your family after expenses and taxes are paid?

Let’s look at a hypothetical example.

If something happened to you, how much revenue would your business need to produce without you to net $1 million after taxes and expenses for your family??

ABC Distribution, LLC is a successful regional provider of specialized equipment and parts for manufacturing firms. ABC’s annual net profit margin is approximately 9% of total sales. The owner pays about 30% in taxes on the pass-through income. For ABC, it could take over $15 million in company sales to provide $1 million in after-tax cash for the family of the deceased owner!?

There are several powerful strategies that can help you accomplish these, and many other, business planning goals. Let’s sit down and talk and you can decide if any of these strategies might be of interest to you.?

New York Life Insurance Company, its agents and employees may not provide legal, tax or accounting advice. Consult your own professional advisors before implementing any plan-ning strategies. ? 2018 New York Life Insurance Company. All rights reserved. SMRU 1778778 (exp. 06.30.2022)?

As you can see, this is very intricate and requires the services of skill professionals in a team based approach to help you navigate successfully.

My mission is to help business owners #findtheircompass - let me help you find yours today!

I'm honored you are here - let's go into 2022 with confidence!

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All the best,

-Roger