This is the second half of an article on dodging difficulties when selling your business. Part I ran in October.

Taxes range from zero to more than 55 percent. Each exit path has a different tax implication. If external sales are not properly structured, it could leave you with little money. This is counterintuitive since many times external sales will generate the highest sales price. However, with a prospective tax yield of about 55 percent or greater, it could leave you with significantly less than you thought. Remember, it is not how much you get, but how much you keep — that’s the bottom line.

The interesting thing is that an internal sale to employees, management or family can have a much smaller tax consequence than an external sale. However, majority of times these deals are structured in a way that creates more of a tax burden for the seller and the buyer.

Various strategies can be implemented in order to make the transaction much more tax efficient.

Beware of predators

Imagine working for 20, 30 or 40 years and losing everything you had in a lawsuit. Exit planning uses strategies such as asset insulation to structure your business, making yourself less attractive to litigation. The purposeful restructuring of your assets in your business can provide you with an added layer of protection against creditors and predators. Businesses are natural targets for lawsuits because of their perceived wealth and deep pockets. According to the nonprofit National Center for State Courts, nearly 20 million U.S. lawsuits are filed every year.

Most of these lawsuits are regarded as frivolous, meaning they have little merit, where the only intent is to intimidate defendants and seek cash settlements from the insurance company instead of a trial.

Law firms are businesses and only pursue cases where there is a reasonable chance of financial gain. If there are no assets to pay the claim, there is a slim likelihood the plaintiff and attorney will initiate the case, even if there is a chance they will win. The best method of protection is, clearly, not to be sued in the first place. Making yourself unattractive to lawsuits should be your first priority.

The strategy of asset insulation is to position assets and finances in such a way so as to make it difficult for a creditor to reach those assets, thereby reducing the chance of litigating.

There are numerous key points and benefits to remember about asset insulation. If properly implemented, it can provide business owners and affluent individuals with an additional layer of protection against predatory lawsuits beyond their existing liability coverage.

Buy-sell agreements

A review of personal and business documents often uncovers provisions that could be devastating to the business owners, the company and the families. The risks oftentimes expose millions of dollars in unnecessary tax liabilities that don’t support the owners’ intentions. Unfortunately, it is usually too late to change the course when the agreement is triggered by death, divorce, departure or disability.

Lack of planning

Most owners are just too busy running their businesses to take time to plan for their exit. They probably have a will they have completed and some estate planning, but not a clear exit plan.

Most think this is just a financial decision. Owners need a plan to see the bottom-line numbers in order to find their financial independence. With an exit plan, the owner can visualize their financial future while protecting their wealth and estate. An exit plan will actually create that blueprint to guide you through this complicated process based on your business, personal and financial goals.

When you can visualize your financial independence and see yourself outside of the business, then it will be much easier to deal with your emotional attachment to the company and focus on your succession and retirement goals. Only then can you clearly see your options and decide how you sell your company.

An exit planner can lead you through this process, discovering the various paths, values and taxes often associated with transferring your business.

Kevin Kennedy is the founder and CEO of Beacon Exit Planning LLC, a managing partner in Beacon Merger & Acquisitions Advisors LLC, a national speaker and author on exit planning and succession for private businesses. He provides plans and strategies to guide private owners with succession and exiting their businesses. For more information, visit or email