Pub. 12 2013-2014 Issue 4

N e w J e r s e y C o a l i t i o n O f A u t o m o t i v e R e t a i l e r s 13 new jersey auto retailer w w w . n j c a r . o r g Some questions everyone should ask themselves before execut- ing an agreement are: • Will succession management be available and willing to operate your business? • Would a satisfactory return on invested business capital be available to your family? • Is there a desire for family members to continue an involve- ment in the dealership? • Is there a ready buyer or partner available? If the answers to the above questions result in the determination that an agreement with a partner is appropriate, then the main components to be addressed are the Seven Ds: death, disability, departure, divorce, deadlock, disagreement, and default. The business valuation process offers many formulas from Book Value to Capitalization of Earnings. • Does your Business Agreement have a Fair Market Value? • When was the agreement last reviewed? • Is the value agreed to in writing and, if not, what amount would the backup formula calculate the value to be (assuming that there is a formula in your agreement)? The next question is what type of agreement should you have? Most owners have a Stock Redemption type of agreement in which the corporation is the main conduit for purchase and sale. If the agreement is funded with life insurance, these proceeds are accessible by your banker at the death of one shareholder, but can cause excess income taxes upon payment and create excessive capital gain taxes if the survivors eventually sell the franchise. There is a way to avoid all three of these economic calamities. If the determination has been made that your children will suc- ceed you and will continue to run the business, then the issue of training comes to the forefront. They become the protector and guardian of your most valued asset and not always at the best possible moment. For the next generation of owners, is a college degree and at- tendance at the NADA Dealer Academy sufficient training to successfully navigate the perils of owning a dealership? If family is the future of the business, why not implement a plan for sev- eral years of thorough training that encompasses several months in all areas of the business that should include the following: • New Cars - sales and inventory • Used Cars - sales and inventory • Parts • Service • Internet Marketing • Customer Relations Years down the road, when the next generation has difficult de- cisions to make about service or Internet marketing or any other aspect of the business operation, their comprehensive training in that particular department should help them understand all the ramifications of the issues before them. Many of you have spent a maximum effort and an anxiety-filled business life to achieve your current economic state – make sure you put some time and the same amount of effort into your Estate and Business Succession Planning and the results will be gratifying to you and everyone. Dennis Amico is one of the founding principals and Chairman and Paul Miller is President of Wealth Preservation Solutions, LLC, a company focused on estate planning, business succession, exit planning and asset management, among other services. Dennis and Paul can be reached at 201.632.2037 or 201.632.2036. If the determination has been made that your children will succeed you and will continue to run the business, then the issue of training comes to the forefront. They become the protector and guardian of your most valued asset and not always at the best possible moment.