The Importance of Converting Equity to Capital

Guy Baker By
Guy Baker
MBA, MSFS

 

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Table of Contents

  1. Introduction
  2. The Beginning
  3. Why have a business entity
  4. To Pass Through or not
  5. Closed Entities and Pass through entities
  6. The benefits of owning a closed entity
  7. The Three Circles of Wealth – The Common Denominator
  8. The Three Big Questions
  9. I. Creating and Retaining Value
  10. II. Keeping Superkeepers
  11. III. Exit Strategies
  12. Additional strategies to build and retain wealth
  13. Conclusion

 

III. EXIT STRATEGIES

Ok! So you are nearing retirement and you are thinking it is time to begin the transition process. What are you going to do? Let’s review your basic options. Obviously, you could hold on to the business as long as possible and then just have your family liquidate the business, and sell off all the assets. This might be very profitable and a great option. But in most cases this just means you hold a fire sale and sell these valuable, income-producing assets at a substantial discount. This can be very painful and tedious. It is a well known truism (maybe a myth?) you will always get more for your business selling it as a going concern than you will selling it piece meal.

Your next option is to sell to an internal buyer. We have discussed the problems this poses. But basically, just as a review, . . .

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