Creating Instant Equity for the Next Generation

Creating Instant Equity for the Next Generation

by Jim Percy

Does the predicament of Coleridge’s ancient mariner, “Water, water, everywhere, nor any drop to drink,” apply to your business? It may apply if the asset at issue is not water, but money. If it does, the use of a private annuity may be the tool that allows your business to quench your thirst.

A common problem in many family businesses is that parents want to retire, but put it off because of their worries about maintaining a sufficient retirement income. These parents often have children who are poised to take over, but lack the funds to buy the business from their parents. This albatross can hang over many businesses, even those that are well-established and profitable, largely because a lion’s share of the family’s assets are in their business. More…

Valuing the Family Business

Valuing the Family BusinessNortheastern University

Family Business Quarterly
by Chris M. Mellen, ASA

Paul Phoenix, successful owner of Phoenix Electronics, Inc., sees the potential for growth in his company, but needs additional funds to finance that growth. He currently holds a 75% interest in Phoenix, with his brother owning the remaining 25%. Paul has given consideration to gifting some shares to his children, as well as to establishing an employee stock ownership plan (ESOP). However, he has been approached by several interested investors to buy equity in Phoenix Electronics. Banks have also expressed a willingness to loan him additional capital. As a result, his advisers have suggested that a formal appraisal of the business would be needed to address all these situations. More…