Senior partner retiring? Options to consider
Sooner or later, a partner in your firm will retire. When that time comes, are you prepared to deal with the inevitable changes? How will you account for the intangible assets that the partner has cultivated over the years? The structure of the buyout payments will determine who bears the biggest tax burden – the retiring partner or the remaining partners. Is there a way to compromise so neither party bears most of the tax burden? Rules of thumb: When is using them appropriate? Ask a business owner what his business is worth, and he will likely say with confidence something like “one times revenue,” “40 times recurring revenue” or “book value.” These types of answers are known as “rules of thumb.” Rules of thumb are appealing because they are easy to understand, but they should not be considered the best indicator of a company’s value. Employee stock options: Consider value vs. expense Stock options. The name alone has a great allure. As a financial instrument, they offer a chance for great reward for little risk today. They offer the right, but not the obligation, to buy stock in the future at a price set today. Often, for growing companies, today’s price is very low compared to what it is expected to be in only a matter of months or a few years.
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