Author Topic: 2 million workers  (Read 4728 times)

sawdustdrew

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2 million workers
« on: March 12, 2015, 02:04:23 PM »
Contemplating selling my business and a fair market value would be 2million dollars.  Assuming I could find someone to buy it, I'm looking for the best way to safely invest my money and enjoy early-ish retirement?  Anyone else have some real life experience in this department?

Thanks

MustachianAccountant

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Re: 2 million workers
« Reply #1 on: March 12, 2015, 02:39:59 PM »
Investing advice is the same no matter how many zeroes there are.
Check the Investing subforum.

wtjbatman

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Re: 2 million workers
« Reply #2 on: March 12, 2015, 05:08:25 PM »
I'd put all my money in timberland.

TN_Steve

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Re: 2 million workers
« Reply #3 on: March 12, 2015, 05:12:50 PM »

sawdustdrew

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Re: 2 million workers
« Reply #4 on: March 12, 2015, 06:44:45 PM »
Thank you. I think managing a windfall with tax implications is not the same as investing with a variable amount of zeroes.  Maybe I phrased the questioned poorly but looking at a one time tax burden of 39.6% vs other options is where I'm trying to get some helpful direction.


hodedofome

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Re: 2 million workers
« Reply #5 on: March 12, 2015, 08:26:21 PM »
What kind of income are you getting from your business currently? You should not expect more than 5% a year from stocks and bonds in this environment.

Ricky

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Re: 2 million workers
« Reply #6 on: March 12, 2015, 08:35:17 PM »
Thank you. I think managing a windfall with tax implications is not the same as investing with a variable amount of zeroes.  Maybe I phrased the questioned poorly but looking at a one time tax burden of 39.6% vs other options is where I'm trying to get some helpful direction.

Other options? The only other options are tax avoidance or a structured sale where you provide owner financing with interest.

h2ogal

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Re: 2 million workers
« Reply #7 on: March 12, 2015, 09:02:16 PM »
This is tricky. 

My DH owns 2 small businesses.  One is a niche industrial/construction service.  The other is a small restaurant.  For most of our lives he said he would Never Retire.  Im OK with that as long as we are not 'stuck' in upstate NY all year and we can take lots of time to vacation and explore.   I have a good paying for a large corporation, so I don't work in the businesses, but I help him with paperwork and such.  I plan to FIRE in 2017, so we have been talking about options for the businesses.

We've had MANY conversations about what he will do in retirement, and how best to use the value of the business as passive retirement income.  When you spent so much time and energy building something, and you have employees and their families dependent on the business, the decision is not always strictly rational/financial.  You have to think about the emotional side of it also.

We've been talking about 3 options for the industrial/construction service business:

1. Outright Sale - This gives us the most freedom, and allows us to move and retire to a lower cost/lower tax state.  Its really important to work with your accountant several years before the sale for tax planning and also the way your are investing, how much cash you are keeping, etc.  For example, one year DH made a mistake in timing the sale of a piece of used equipment.  His plan was to take the cash from the sale and re-invest in a new piece of equipment.  The purchase deal on the new equipment fell through at the last minute, which was right before his year-end.  He wound up with an extra 90K on his tax bill that year.  Also, proper valuation of any business can be complicated.   

2. Succession Planning - 2 of our 3 boys have expressed some interest in taking over the business.  One is currently working for the business full time, but he is still very young.  He may change his mind.  If the kids take over managing the business they could pay DH a management consulting fee in dividends, a small salary, indefinitely.  DH could maintain certain decision rights for a period of time until they have enough experience and are fully competent.

3. Hire a manager.  DH likes to stay busy, so another option is to hire a manager and work less and less while taking dividends/salary, until very old age.

The small restaurant is not worth a lot as a business, but the the building is worth leasing out (nice detached building with a few acres surrounding and a good size parking lot).  So the plan is to look into leasing out the building.

Keep in touch and let us know what you learn....

TN_Steve

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Re: 2 million workers
« Reply #8 on: March 12, 2015, 09:31:32 PM »
Thank you. I think managing a windfall with tax implications is not the same as investing with a variable amount of zeroes.  Maybe I phrased the questioned poorly but looking at a one time tax burden of 39.6% vs other options is where I'm trying to get some helpful direction.

Why 39.6%?  From 10,000 ft, this looks like a capital gain transaction (or, at a minimum, could easily be structured legally as such).  Still not a fun hit, but quite a bit better, at 20% and 23.8% over 250K (MFJ)--and, of course, you would only be taxed to the extent that 2,000,000 exceeds your basis.

No real way to avoid it if you want to cash out.  Maybe could structure as 1031 exchange if want to keep another ongoing business, but I'm not certain about that, and would require knowledgeable tax consult before finalizing terms of deal.  (Moreover, if you do want to "cash out," 1031 probably is not the way to go.)