Article by Russ Prince
Most successful technology start-ups are bought by other – usually larger – technology companies. The result is the entrepreneurs/owners of the start-ups become wealthy whether in stock in the acquirer or in cash or both. In a substantial percentage of these situations, if the tech entrepreneurs paid more attention to their personal financial situations as well as on the sale of their start-up companies, they would walk away from the transaction significantly personally wealthier.
According to Anthony Glomski, principal of AG Asset Advisory, a leading wealth management firm and author of Liquidity and You: A Personal Guide for Tech and Business Entrepreneurs Approaching an Exit, “The sale price of the tech company and how much of it is owned by the entrepreneur are usually the most critical factors in determining his or her personal wealth. However, it’s often possible to structure the entrepreneur’s personal financials to mitigate taxes on the sale and thereby maximize his or her wealth. Unfortunately, most tech entrepreneurs understandably get so wrapped up in the sale that they overlook these tax saving wealth management strategies.”
Missing out on mitigating personal taxes when a business is sold is not in any way restricted to tech entrepreneurs. Based on extensive research with a diverse array of business owners who are looking to or have sold their companies, failing to take advantage of state-of-the-art tax mitigating wealth management strategies is quite common.
“If entrepreneurs intend to sell their companies some day, it’s usually a good idea for them to consider not only the sale but also how to ensure that as much of the sale price as possible ends up in their pockets after the government gets it’s share,” says Rick Flynn, managing partner of FFO Business Management & Family Office and author of The High-Functioning Single-Family Office. “In working with exceptionally successful entrepreneurs on the sale of their companies, we not only focus on maximizing the price for the business but also on how to minimize the taxes they will owe.”
For tech entrepreneurs, focusing on the sale of their companies, coupled with using state-of-the-art wealth management strategies, results in maximizing personal wealth from the sale of their firms.
Originally posted on Forbes.com, February 20th, 2018. Original Article can be viewed here