Importance of exit planning in Year-end plans

We all are living in quite an exceptional time and many things have been changed only because of this coronavirus. Our lifestyles have changed tremendously but the laws governing the finance sector has changed even more. As a result of that, a lot of individuals and business owners are having difficulties. Based on all these uninvited circumstances, there is an immediate need of exit planning in the year-end of plans of the businessmen.

There are many questions that a business owner should ask. Only after getting the answers to those questions will decide how important is the role of exit planning? Let us take a look at these vital questions:

• Has the business owner any advantage from the current business structure?
• Does your client’s business structure allows having new ownership?
• Can a flow-through structure like partnership and S corporation be preferable to the C corporate structure and can it get a 21% fatal rate?

Talking of the C corporation, the owner loans should be there in the capital structure. Having this facility is enough to provide withdrawal facilities from such businesses and there will not be any issue with the dividend problems that are related to the C corporation stock.

What is there for the family as Business owners?

The lifetime gifts of business interests for the family versus the testamentary transfers is the biggest issue in this type. At the time of transferring the business ownership to the family, the business and other resources should be considerable. This is the only way to avoid the risk of incurring gift during this process.

This topic has become very important to discuss this year because of the introduction of higher exemptions rates. The current exemption level has been planned to get back on its real position (as in pre-2018) by or even after 2025.

The current transfer rate lies at $11,580,000 per spouse but it is not sure that the same rate will be available once the government changes. You can get more information about the ongoing rates on the official website of tax accountant Melbourne.

How about the buyers?

Year-ends are the best times to consider the potential competitors and other factors so that profit may be enhanced. These reviews are very helpful in identifying the best companies in the market who are able to buy competitors.

What should the owners do?

The owners don’t need to be free in this situation. There are a lot of questions that need to be asked here:

• Can the owner plan to exchange in order to avoid the current gain?
• Is he able to plan his sale of the business in a way so that state tax gain can be minimized?
• How he should plan the realty?
• Can the owner start-up a new industry or a specific phase in his existing industry?

If they are planning to start something new, they should consider all the sources from where the maximum output will be generated. 

Conclusion:

All of these concepts may seem unworthy for you if you are looking at them with a short-term perspective. But when you consider the long-term effects of it, you will be able to see the benefits. If you are looking for tax agent Melbourne, Accounts NextGen is there to help you. We provide every kind of accounting and taxation service for all types of businesses.