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Case Study: Organizing and Financing a Succession Plan

The owner wanted to retire, transfer ownership to his children, maintain an income from the business, and ensure that the business would continue to prosper.

QuantumCFO designed a creative and cost-effective succession plan using it’s extensive network of legal and insurance professionals and is providing on-going management support to the business.

The Challenge

The owner of a business was looking to retire and turn the business over to his two children.  However, he wanted to maintain an income from the business for himself going forward, and provide for his wife financially in the event of his death.  With this in mind, he wanted to maintain an ongoing comfort level that the business was maintaining a solid financial condition.  He also wanted to assure that the approach he was taking was a sound business approach, rather than an emotional one.   

The Solution

QuantumCFO first performed a comprehensive analysis of the existing business model and management structure, the planned management structure with the children running the business, and the related succession components currently in place.  The analysis identified a number of issues to be addressed to achieve a successful succession plan.

This included such issues as: an independent assessment of the childrens’ ability to run the business; developing, with the owner, a formal Table of Organization specifically outlining the positions and duties of each of the children; assessing how other key employees would respond to the executive transitioning; determining the ongoing income the owner would like to receive; determining the best structure for that income, with particular consideration to related tax issues; determining an ongoing support structure for the children that would provide the owner with the comfort level he wants; determining how to best provide for the owner’s wife in the event of his death; and determining how to best formally transfer ownership of the business over to the children.

From the analysis, QuantumCFO designed a comprehensive solution and worked with the owner to implement it.  The solution included: determining the proper position for each of the children, and a proper plan for transitioning them into those positions; coordination with other key employees to involve them in the transitioning; determining and implementing the proper structure for the owner’s ongoing income; implementing an ongoing support structure for the children to provide the owner comfort that the business would remain financially solid; designing and executing a formal succession plan to clearly establish all related details, including the orderly transition of ownership of the business; determining and implementing the most cost-effective approach to life insurance to provide for the owner’s wife in the event of his death; and determining the most effective tax management programming for all aspects of the plan.

QuantumCFO brought in experts from its network to assist with related legal and insurance matters, providing the owner a “one-stop shop” approach to cover all aspects of the plan.    

The Outcome

The succession plan is now in place and functioning perfectly.  The owner is retired and receiving his desired income level.  The children are running the company, with QuantumCFO providing the ongoing support system the owner wanted to assure a solid financial position is maintained.  A creative approach to the life insurance has provided the owner with greater death benefits than originally anticipated, at a lesser cost.

At the point in time the owner established for formally transferring ownership of the business to the children, that transition will occur in accordance with the formal detailed plan determined by the owner.

Every aspect of the plan has been designed to minimize the related tax liability.  The tax planning is periodically reviewed, and updated as needed, to always stay current with new tax laws.

In summary, the owner has a plan in place that is exactly what he wanted, and he has peace of mind that the succession plan can be carried out to the conclusion he wanted.

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Chagrin Falls, OH 44023

+1 440 363 0899
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