Maximizing personal wealth when selling a business.

• Author: Bingham, Zachary

An estimated 10 million small companies are expected to hang up a "for sale" sign over the next five to ten years, spurred by the upcoming wave of Baby Boomer retirements.

Many owners of closely held businesses have spent a lifetime building their enterprises, so it's no surprise emotions can run high as they explore a sale. This is a life-changing event for the owner, requiring profound financial decisions.

In October, KeyBank collaborated with ASG Partners and Thomas, Head & Greisen to host a seminar on transition planning for Alaska business owners. Guests were especially interested in strategies for getting the highest possible sale price for their businesses, since selling a privately held enterprise will likely be the most important financial event in an owner's life.

Most business owners have two primary objectives: obtaining the highest price from the buyer and paying the least amount of taxes on the transaction.

By integrating potential deal terms, key tax and estate planning strategies, and the business owner's financial goals, the owner and his team of advisors can most effectively extract maximum value from the deal.

Identifying the Business Owners' Goals and Priorities

The sale of a business often allows the owner's spending, legacy, and philanthropic goals to be met through careful planning and setting of priorities prior to the beginning of the sale. These goals and priorities will be major drivers of the strategies adopted.

There are four things people can do with their money:

* Spend it

* Give it to the people they care about

* Give it to charity

* Send it to the government as taxes

Additionally, business owners must weigh priorities:

* Do they want to start a new business or enjoy retirement?

* Do they want to pass on a legacy to heirs or establish a charitable foundation?

* Do they want to exit or stay involved in the business?

Understanding the Terms of the Sale Relative to Goals

Many deals are straightforward, with cash proceeds when the deal closes.

Some offers include a significant amount of stock in the acquiring company, and in those cases other issues may arise: Will the proceeds be fixed at the time the deal closes, or based on the performance of the acquiring company's stock? Will the stock be subject to a lengthy lockup period when selling is prohibited?

Whether stock, cash, or both change hands, contingencies may be added to the deal; some of the proceeds may be payable in installments over time, for example...