Construction Today - March 2012 - (Page 6)

BEST PRACTICES Preparing for the ultimate transfer of your company can save headaches. BY CRAIG KOOP AND ERIN HOLLIS PLANNING AHEAD O wning a successful and closely held business often presents some challenging issues for business owners. Many of these concerns are related to the business operational issues such as financing, personnel, inventory, marketing or other day-to-day activities. In some instances, however, major problems can go unnoticed by business owners until it is too late to make essential decisions. Understanding the value of the company while there is still time to creatively plan for its ultimate transfer is critically important. Yet, many owners do not know the fair market value of their own businesses or appreciate the benefits of this knowledge. Additionally, they may not fully recognize the implications of the federal estate and gift tax system or the state level estate, gift or inheritance taxes. The solution is to plan for these circumstances well in advance of the need to transfer the ownership of the company. Fair Market Value Variables Many small business owners understand the implications of income, payroll, sales and capital taxes. However, because estate and gift taxes are not usually a factor until the death of the business owner or when a significant stock gift of the closely held business is made to the next generation, these tax problems can go unnoticed. Yet, if the owner’s plan is to pass the business to the next-generation heirs, the problems arising from these taxes may be considerable. For many closely held companies, especially family owned ones, the goal is to transfer the business to the next generation of shareholders. In these situations, often owners may prefer to pass on their companies as a gift. Even in situations where owners are seeking a stream of income, they still may desire to transfer their businesses at a reduced value. In these circumstances, it would not be unusual for the company itself to make up a significant portion of the overall wealth of the owner. If the owner waits and allows the business to transfer to the next generation at his or her death, the estate may be so overwhelmed with the resulting estate taxes that the business itself may need to be sold to satisfy the taxes. Additionally, it is possible that this type of distressed sale may not yield what it should in terms of fair market value. Obviously, these unexpected and unintended consequences may have catastrophic results, especially considering that a small business owner may see his or her life’s work and legacy, along with the family’s primary revenue source, go up in flames. The answer is for closely held business owners to understand the importance of learning the value of their business along with the impact of the ultimate distribution to the next 6 CONSTRUCTION-TODAY.COM MARCH 2012 http://www.CONSTRUCTION-TODAY.COM

Table of Contents for the Digital Edition of Construction Today - March 2012

Construction Today - March 2012
Best Practices
Construction Insurance
JC Beal Construction – Brod - erick Tower redevelopment
Harden Group
Pyramid Companies – Destiny USA
EllisDon – Yorkdale Shopping Center
HBD – Dierbags
Marous Brothers Construction
Roy Anderson Corp. – Margaritaville Casino and Restaurant
Foulger-Pratt Contracting LLC – Lorton Workhouse Arts Center
Penn Builders Inc.
Turner Finch Construction – University of Kentucky Center for Applied Energy Research
Bouygues-Bird Joint Venture – Royal Canadian Mounted Police E Division Headquarters
Camden County Improvement Authority: Cooper Medical School of Rowan University
Coreslab Structures (OKLA) Inc.
Hensel Phelps Construction Co. – City of San Antonio Public Safety Headquarters
Kjellstrom + Lee Inc. – UVA Barry & Bill Battle Building
Hensel Phelps – High-altitude Army Aviation Training Site
Texas A&M University – Northside Residence Hall
Milton J. Womack Inc./JE Dunn JV – Our Lady of the Lake Heart and Vascular Tower and Trauma Center Expansion
AvalonBay Communities Inc. – Avalon Park Crest
Powell Construction Services LLC
AvalonBay Communities Inc. – AVA H Street
Buckingham Companies
Fortune-Johnson General Contractors
Current Builders – The Residences at Lakehouse
Forino Co.
Mill Creek Residential Trust LLC
Black Hills Corp. – Pueblo Airport Generation Station
URS Corp./Alberici Constructors Inc. – Olmsted Dam Project
APEX Block Corp.
BMW Constructors Inc.
Last Look

Construction Today - March 2012