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Business People, Start the New Year Off Right!!


The beginning of the year is the best time to develop a strategy for your business.  Too often, business people wait until the last week of the year to do their planning.  While there are some actions that can be taken late in the year, those who work proactively throughout the year implementing business and tax strategies fare far better than those who put planning off to the last minute.  There are plenty of areas and items of tax planning that should be attended to throughout the year.

Business Operations

Given that the economy is currently in a recession, businesses should trim unnecessary expenses and work hard to increase revenue.  Most expenses that business people trim tend to involve payroll and inventory.  Now might be the right time to cut back on the hours an employee works rather than to layoff employees.  It is more efficient to have employees work fewer hours than to cut back on employees and lose the value of a good employee.  In addition, rather than stop purchasing inventory, it may be best to purchase smaller amounts more often.  This will decrease the cash outlay as well as the space and people needed to handle the inventory.  The benefits to this concept of inventory control will be seen not just in dollars saved, but in efficiency increases as well.   When business picks up, as it inevitably will, then will be the right time to increase hours worked by employees and increase inventories as necessary to deal with the increased business.


Instinctively, businesses tend to cut investments as well when business is slow.  Ordinarily, this response to the business stimuli would be appropriate. However, given increased Internal Revenue Code section 179 expense deductions and manufacturer’s incentives to purchase more investments like trucks, equipment, and even buildings, economic down turns tend to be excellent times to increase investments in business property, especially if the investments will create more efficiency in operations.  The superior financing and tax incentives during an economic down swing can and usually do outweigh any benefit through saving money by cutting back on needed investments.  Further, think of it this way, if you do not reinvest now, you may have to reinvest later, when the tax and manufacturer’s incentives are not as good as they are today.


The economic down turn has also brought with it lower financing rates.  The financing on buildings and equipment may be eligible for lower refinancing rates.  Check with your bank to see if your loans can be refinanced.  The key is to work with your current financial institution, as changing financial institutions could result in high fees.  Please check the fees and costs before committing to any refinancing.

Estate Planning

Many business people have complex estates.  Along with the complexity, the average net worth of a business person is substantially higher than an employee.  In 2011, barring action from Congress, the estate tax exemption falls from “unlimited” back to $1,000,000.  One million dollars used to be a sizable estate; however, now with the changes in housing values, the potential increase in business value and other sources of worth, an average business person’s estate may very easily be over the maximum amount of the current or future tax exclusion amount.  It is best to begin estate planning early in a year so issues can be ironed out throughout the year and the estate plan can have time to operate during the year.  Please review your total estate value and start the process of a complete estate planning process now.

Succession Planning

Along with estate planning, comes business succession planning for those who own businesses.  Business succession planning is not as simple as drafting a will.  Business succession planning, when done properly, provides a smooth transition for the succeeding generation.  The process includes the valuation of the business and the creation of legal documents, such as a buy/sell agreement (the most important legal document a business owner can have.)  When succession planning is not done or is done improperly, it usually means the loss of the business and therefore the loss of your lifetime of hard work.  Don’t procrastinate, start the process now!


Beyond the above subjects, there is plenty that can be done to improve your financial and tax situation throughout the year.  Too often people approach financial, tax, and business planning as an after thought of running the operations of their business.  Operating a business in this manner does not afford the business person an opportunity to see the bigger picture.  Running a business without a plan to exit and retire is similar to driving a vehicle, yet having no destination.  Proper planning and implementation of an exit, succession and tax strategy allows you to keep more of your hard earned cash and allows you to have a better retirement when the time comes.  If you are not sure where to start or how to start, please contact the experts at the Center to assist you in your exit, succession and tax planning strategies.

By: Dr. Bart Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors