September 1998 - volume 1, issue 2

taying consistent with the unpredictable changes in the economy has always been a difficult task. Like most, we don't plan for the future; we take it as it comes day to day.

As government administrations change, so do the policies and ideas that come with them. Unfortunately, as policies and regulations change so do your opportunities for success and sustaining your family's wealth.

The Clinton Administration desires to increase inheritance tax on individuals. One of their stated targets is to limit valuation discounts on gifts involving active businesses. In other words, if you own a business and don't have a planned tax-strategy for when it comes time to pass it on, possibly to a family member, you could very well suffer from increased inheritance tax. You should keep in mind a planned-tax-strategy before executing any transfer. When transferring ownership of any property it is vital to be up to date with the changes that could affect you in the future. Utilizing a Family Limited Partnership (FLP) through proper planning may avail you to "discounting" the value of a business, property or other assets.

In some cases discounts as much as 35% have been taken to reduce the value of an estate or for gifting of partnership interests to heirs. The Family Limited Partnership has become very popular and is relatively easy to establish but you should consult with a qualified professional to ensure the benefits.

Keep in mind, once Congress passes the law it will be too late to get a discount for your family limited partnership gifts. Fortunately, the fact Congress is slow about such tax changes should help delay and possibly kill the enactment of the law.

You are the owner of a closely held business, you are healthy, your business is healthy and the market you operate in is strong. The contrary position may also be true - things have looked better in the past; now, what do I do? Regardless of your position, either you or your closest advisors (attorney, CPA, etc.) may think it's time to have your business valued.

Regular valuations can answer the question, "how am I doing?" Depending on the method of valuation you choose, you can project future earnings, assess your company against similar operations or determine the market value of your intangible assets. Just because you're comfortable with your current status, doesn't mean you shouldn't prepare for the possibility of changes down the road. You may want to look at selling shares in your company to fuel an expansion. Do you know what the estate liabilities will be for your heirs? If not, avoid overpaying gift and estate taxes by having a well-documented valuation study. Applying for a business loan may also necessitate a business valuation. You are the owner of a closely held business, you are healthy, your business is healthy and the market you operate in is strong. The contrary position may also be true - things have looked better in the past; now, what do I do? Regardless of your position, either you or your closest advisors (attorney, CPA, etc.) may think it's time to have your business valued.

Regular valuations can answer the question, "how am I doing?" Depending on the method of valuation you choose, you can project future earnings, assess your company against similar operations or determine the market value of your intangible assets. Just because you're comfortable with your current status, doesn't mean you shouldn't prepare for the possibility of changes down the road. You may want to look at selling shares in your company to fuel an expansion. Do you know what the estate liabilities will be for your heirs? If not, avoid overpaying gift and estate taxes by having a well-documented valuation study. Applying for a business loan may also necessitate a business valuation.

There are a number of different methods for valuing closely held businesses, each one providing a different view of the company. Often, several methods will be used to provide a balanced valuation. Other times, unique circumstances, such as special tax-planning strategies or family members working as employees, may dictate a particular method.

LSH knows that valuing closely held companies means doing more than looking at stock prices. Our business valuations are very thorough. We consider it a challenge to uncover and weigh all information. The result is an accurate valuation for you, and an important business tool on which to base future decisions .LSH personally assists high net worth individuals and business owners in defining their goals and implementing strategies. By offering intelligent choices, flexibility and guidance, we assist our clients in structuring their portfolios and making timely decisions on their own terms. LSH offers three distinct areas of expertise: Tax (income & estate planning, financial planning, succession issues, and others), Accounting and Auditing, and Professional Business Consulting Services (business valuations, business sales, mergers and acquisitions, tactical & strategic planning, and capital financing).

Professional Tax Services: We are experienced in taxation as it relates to trusts and estates, real estate sales and exchanges, pension and profit-sharing plans, deferred compensation, liquidations, mergers, and others. To minimize your current and potential tax, we offer creative answers with advance planning of your business transactions.

Accounting & Auditing Services: LSH provides a full service accounting and auditing department. Our primary services include:

Compliance: business audits, reviews, compilations, attestations and special purpose reports, personal financial statements, and preparation of reports and filing for various regulatory agencies.

Financial Services: bookkeeping services, summaries of cash receipts and disbursements, transactional entries, payroll checks, check writing service, bank reconciliation, and annual assistance with closing books and records.

Professional Business Services: We offer a wide range of business services for small to mid-sized businesses and assists privately or publicly traded companies in evaluating, business planning & acquisition searches, and selling companies. We also offer Capital Financing for corporations from $1 million to $400 million. To secure the future of your business and to ensure your family's economic needs, a planned approach only adds to the potential element of success.

Succession planning is a complex endeavor, which is well worth the effort. Families who implement such foresight discover their personal and business wealth are healthier for it. The planning process helps define the path on where they're going as individuals, a family unit, and an enterprise. Following the planned guidelines reinforces the rational thinking and functioning of family members. The essence to the long-term duration of any company is planning. For family businesses, a succession plan is critical o the continuance and economic well being for both the company and the family. It entails the transfer of assets, capital, contacts, power, skills, and authority from one generation to the next. It is necessary to examine the perplexing issues when deciding on passing your company to a family member, or selling outside the family. It's never to early in the life of your business to seriously contemplate these issues.