The business section of the March 20th issue of the Arizona Republic had a front page article titled “Families Passing Business Torch”. My practice often involves working with families on the subject and I found the article very timely, particularly since studies tell us that during the next several years 30 to 40 percent of both family, as well as non-family owned businesses will “attempt” to transfer ownership. I say “attempt” because 2 in 3 family businesses fail after transition to the second generation. As business owners approach retirement age, they are dealing with several complex questions and conflicting goals.

The business owner wants to monetize his equity in his corporation, and in many cases there is a desire to maintain family ownership of the business. If the business is sold to outsiders to achieve personal financial security, the children are left without the legacy of the family business. Alternatively, if the owner decides to transfer the business to family members, then the owner will likely be without the same personal financial security and may have to deal with a significant gift or estate tax liability.

In many cases, business owners adhere to what I call the “avoidance of the unknown syndrome”, which translates into: if I don’t think of the problem it doesn’t exist. Statistics tell us that these situations often wind up resulting in a forced sale of the business by the owner’s estate in order to settle the estate taxes. One very notable example is the Robbie family’s compelled sale of their ownership interest in the Miami Dolphins and Joe Robbie stadium. The cover page of the March 26th issue of the Wall Street Journal mentions that treasury officials continue to be opposed to a reduction or elimination of the estate tax contending it would be too costly and a sop to the rich.

There are many different options to accommodate the objectives of business owners relative to succession planning, but some of them are necessarily more painful than others and/or more tax expensive than others. One strategy that has been around for about fifty years and is currently employed by about 12,000 U.S. corporations is the Employee Stock Ownership Plan (ESOP). Simply stated the most notable advantages to a business owner are:

He can sell a portion of the business to the employees in a very tax-friendly manner,
Keep or retain actual control of the company in the family; and
Significantly reduce his income, gift, and/or estate tax liability.
The ESOP strategy is often used as an ongoing tax shelter to be used later for succession with much additional tax benefit.

This represents the best of all worlds since the business owner is able to (1) to achieve personal financial security by liquidating a portion of his single largest asset and (2) to keep the family business in the family. When properly structured, the ESOP can enable the business owner to obtain greatly enhanced liquidity and diversification — with far more real value. Approximately fifty years ago, Louis Kelso was successful in convincing Senator Russell Long, the then chairman of the Senate Finance Committee, to propose legislation that would provide very dramatic tax and cash advantages to business owner ESOP sponsors.

Congress enacted the legislation and today, fifty years later, those benefits remain available to business owners of closely held companies. Under Internal Revenue Code Sec. 1042, a shareholder who sells stock to an ESOP is able to forego the payment of any capital gains taxes due — if the sale meets the specified conditions. Essentially the business owner has a year to reinvest the cash from the sale of his stock to his ESOP into some alternate type of security.

This provides a superb means of income during the retirement years and if held until his death the business owner’s family will never have to pay capital gains tax on the ESOP stock sale. An aggressive gifting program to family members can produce significant income and estate tax savings for the closely held business owner. If the business owner has a philanthropic inclination, by using a strategy called “CRUT” (charitable remainder unitrust) a significant amount of annual income can be guaranteed for Mr. Business Owner during his and his spouse’s lifetime in addition to a large upfront tax deduction. And in fact, structured properly the family wealth can be magnified, as well as providing a significant sum of money to the charity.

Currently, the U.S. gift and estate tax rates are significantly higher than capital gains and even ordinary income tax rates. Combining an ESOP with estate planning techniques can result in business owners successfully keeping the business within the family or where this is not the intent, provide a very unique mechanism to transfer ownership to non-family members. In both cases, because of the dramatic tax and cash advantages it makes good sense for business owners to explore their options and the ESOP strategy is certainly worth looking at.

Auctions are those events where properties or goods are sold to the highest bidder. Auctions are mostly public events, where bidders make a series of bids and purchase a particular item for a high price. During auctions, bidders decide the price of an item rather than the seller. It depends on bidders to decide the amount they would want to pay for a specific item. During an auction, a bid is a proof of a legal binding. Bidders agree to pay the amount that they have bid. In a high profile auction, bidders may have to pay a deposit in escrow accounts or give a proof that they can pay for those items.

Types of Auctions:

Different types of auctions take place around the world. Below mentioned are some types of auctions:

1. English auction:
This is a basic type of auction. In this type, people can see the item and then start bidding. Bidders slowly raise the value of their bid until everyone gives up. The highest bidder is the winner. An auctioneer manages an auction, keeps records of the on going bid and decides the winner. Sometimes, the seller will quote a minimum amount for an item to the auctioneer, below which the auctioneer cannot sell that item.

2. Dutch auction:
In this type, the auctioneer sets a particular price and then gradually lowers the price. People in public will start bidding and later decide which prices are suitable for the item. A seller may use this type of auction to sell large quantities of same products to the public. For instance, a seller may want to sell a large amount of hay and will thus, decide to sell this hay to people for the same amount, once a reasonable price is decided.

3. Silent auction:
In this type, the bidders in public will present their bids in a sealed format. These sealed bids open at the same time and bidder with the highest bid wins. There could be a modification in this type of auction. The bidders are allotted a specific period to bid. They can roam in a room displaying the items, and write their bids on an associated sheet of paper. The bidders are allowed to see bids of other bidders and can choose a higher price for an item. At the end of the allotted time, bidder with the highest bid is the winner.

Examples of Auctions:

Auctions can be of two types either public or private. Sellers may trade any kind of items in both types of auctions. Some areas where auctions take place are:

1. Antique auction: An antique auction consists of a trade opportunity as well as provides entertainment.

2. Collectable auction: In a collectable auction, the seller may put up collectables like coins, vintage cars, luxury, stamps, real estate, and luxury for sale.

3. Wine auction: In wine auction, bidders can bid for rare wine, which may not be available in retail wine shops.

4. Horse auction: Bidders can bid for young horses of the best breed.

5. Livestock auction: In livestock auction, bidders can buy pigs, sheep, cattle, and other livestock.

The other examples of auctions may not be public. These auctions are for bidders from corporate levels. Some examples of private auctions are:

1. Timber auction
2. Spectrum auction
3. Electricity auction
4. Debit auction
5. Environmental auction
6. Auto auction
7. Electronic market auction
8. Sales of business auction

Bidders in an auction need to examine the items displayed and decide an appropriate price for an item. Thus, auctions help buyers in getting the best deals and in gaining better profits for sellers.

It’s no secret that in today’s economy, it is becoming increasingly difficult for one to be financially-independent, especially with the rising cost of goods and lack of jobs available. So it would really be a blessing if you can earn some extra cash on the side that will help keep you in good shape. Initially, it might not pay enough for you to be completely independent, but any amount of cash that can help pay the day to day expenses is a very good thing. This is where the importance of home-based business opportunities comes in, as it allows you to earn that extra bit of cash to ease your worries.How to start your own home-based businessThe best way to go about starting your home-based business is to identify what you love to do, and then see if it can be turned in to viable home-based business. Complicated as it may sound, it really isn’t. For instance, if you are great at sewing, then this can easily be turned in to a lucrative business opportunity with little or no investment. You don’t even need any signboard outside; you can conduct all your advertising and handle your bookings online.Most businesses nowadays start as small home-based business operations that grow in time and find themselves in a position to expand further. There is no reason why your particular home-based venture can’t do the same. All you need is the right attitude and a market that is ready for your particular idea and your business will surely be successful.Online businessesThe easiest and most common home business opportunity lies in e-commerce. It is by far, one of the fastest growing industries in the world in terms of the number of businesses that have taken that route. The numbers are growing even further with every passing year. Whether you want to sell your clothes or any other goods that you may own, selling online is one of the easiest ways to earn money. You would just need to check in a few times a day to see if people have placed any orders. People have even started to sell customized t-shirts and shoes online, and have adopted this is as a full time, legitimate home-based opportunity.You can even be a professional seller at auction sites like yahoo auction or eBay. This would require you to ship items and wait for the money to come in. According to eBay, there are over a million professional sellers on their website, and you can add your name to that list if you want to adopt this as your home-based business operation.ConclusionWith living and earning money becoming more and more difficult these days, starting a home-based business can really be a very practical move that you should be considering. However, your business operation will not be worth it if you are earning only a minimal amount for the effort you put in. So to ensure that you will profit from your endeavor, plan and strategize very carefully. And when you start getting some profit, be sure to put aside some so that you will have something to reinvest for the future of your business.The ultimate purpose of all businesses should be to grow and this is definitely no different for a home-based model.