A prospective client called a few weeks ago to discuss his tax situation. He sold his business in 2016 and was very unhappy with his income tax bill. He asked, “Can you lower my taxes? Did the return preparer calculate my taxes correctly?” After a brief review of his sales contract and the return prepared for him, the answer was clear. The return was prepared correctly. However, wise tax planning when he started his business about ten years ago, or even a few years back, would have saved him a very large sum of money when he sold his business.
We could not fix what he had failed to do, but he now understands the value of advanced tax and estate planning and has engaged us to re-organize his existing structure and to set up his new business correctly.
Another Kleenex moment was when my assistant said: “Mr. Jones is on the phone, again. He insists on speaking with you immediately. He says it is an emergency!” Mr. Jones is someone who calls our office every year or two. His story is always the same. He wants to lower his taxes and protect his assets – but he is just too busy to do anything at the time and never gets around to doing anything. What he really wants is to do it himself.
This call was different. Something we had warned him about previously had come to past, and he has been sued and lost the lawsuit. Now he was ready to do what we had recommended for years! Mr. Jones pleaded, “You have to do something! Please do not tell me it is too late!”
This is why I keep a box of Kleenex on my desk! It is for people who do not plan well when they start their business, or who do not take opportunity to review and improve their structures as their business and assets grow. Now they are faced with paying significantly more in taxes and legal fees than they anticipated or are having to give someone (including IRS) far more of their income and assets than they think is fair.
A realtor client asked us to meet with someone they were trying to help downsize. The realtor said, “Fred’s story seems so sad, please see if you can help him.” This is Fred’s story:
Fred had a very creative idea he knew would one day be big if he just get it to market. He worked long and hard to get his idea into a marketable condition. Along the way, he met a nice girl, married, had some kids – times were tough, but life seemed good. Finally, it all came together for Fred. His idea worked and he was now ready to approach the market. So, with the help of his friendly neighborhood tax preparer, he bought an incorporation kit for $199, formed his company and put his patents in the name of his corporation. Suddenly, his business became wildly successful. When his business took off – so did his wife and children. His customers ask for product, but his wife asked for a divorce! The judge awarded her one-half of the business. Not only did he say goodbye to his ex-wife and his children, but he had to give her one-half of his rapidly growing multi-million dollar business. Even more humiliating is the fact that his ex-wife’s lawyers are going to be present at every Board of Director’s meeting “to protect their client’s interest”. What happened here could have been avoided with proper planning on Fred’s part. There was no happy ending for anyone, except for Fred’s competitors who took advantage of the chaos in Fred’s life and his business and took over the market.
These are real stories about real people, but they do not have to be your story. The investment required to establish a proper structure through which to own your assets and to operate your business may well be the most significant investment of your career. Your CPA should help you think through the most tax-efficient and protected way of getting into business, of operating your business, and exiting your business when you decide to sell.
We are tax, estate and asset protection strategists. We specialize in the type of planning that could have avoided these “Kleenex moments”.
When we accept a new client, our first step is to conduct a thorough review of their personal and business structures and their family goals. We help our client think through their end goals for their business and their wealth accumulation goals. Then, we create a structure, or modify an existing structure, so that it will provide our client with the maximum of control and the minimum tax or personal financial risks possible.
The underlying principles we follow in creative planning for clients are these:
- Real wealth accumulation for a family is a generational concept.
- What you do not own cannot be taken from you!
- Own nothing, control everything!
- Careful tax planning is essential to real wealth accumulation.
- What you earn today must provide for today and tomorrow.
- You must understand your planning and be able to supervise its maintenance.
- The cost of strategic planning is usually paid for by the savings generated in the first year.
There is no better time than today to create a proper structure to assure that you are able to enjoy your financial success and are able to pass it along to your heirs with the minimum of taxes and exposure to predators.