Planning Business Succession and (hopefully) Retirement
Great article here about, among other things, Francesca’s restaurant in Chicago and its growth from one location into nineteen. Stories like this are great, but they always make me think about the business owner’s self-made problem…let me try to explain.
You spend 20 years growing your business. It works. You grow, you’re profitable, people want to be associated with you and your brand is known and respected in the market. Now what? Problem here is, if you get burned out, you don’t have too many options. It’s not like having a mid-life (or quarter-life) crisis and giving it all up to backpack the Alps is in the cards because more than likely if you leave, the business dies.
What to do? Well, there are two options. First, selling the business outright. Second, business succession planning which may include a sale. What’s the difference? Basically, the first option is geared toward a quick strike…but as we know from years of watching ER, it’s not always good to pull the knife out of the patient. If the owner sells and leaves quickly, the business may die.
In cases like this…where the owner’s charisma and presence make the business what it is and contribute significantly to its ongoing success…the answer is clear: business succession planning. Key questions here:
-Who has the technical ability to take over?
-Who has the charisma to develop and market the business?
-How should these folks be paid?
-What role will the owner take on as he/she transitions out of the business?
-How can the goodwill of the business remain intact through the transition?
These are key questions, and once answered must be thought of in a larger context of being tax-wise and business savvy.
Chicago Tax Blogger: Adoption Expense Tax Credit
See this article by yours truly on the Adoption Expense Tax Credit at one of the places where I will be blogging regularly on tax and estate planning issues.
Madison, Wisconsin: Cultural Mecca for Chicagoans
Here is installment #2 of posts having nothing to do with tax, business law or any other such tomfoolery.
There used to be a sign on I-94 in Illinois, just south of the Wisconsin Border that read: “Just across the border: Food, Drinks, Beer, Cheese, Fireworks.” Doesn’t that say it all? A place where food and cheese and drinks and beer are considered mutually exclusive concepts is a place for me…and you too.
My wife and I make an annual pilgrimage up to Madison, Wisconsin every summer for two things: (1) the best Farmer’s Market in the world in Madison; and (2) high end outdoor theater, Wisconsin farm country style.
The Farmer’s Market in Madison (technically the “Dane County Farmer’s Market on the Square”) is, as I stated, the best in the world. It makes Green City in Chicago’s Lincoln Park look like a convenience store. Why is it so great? First, it’s huge. Vendors line all the way around the capital square in Madison. Second, given its size, the vendors are diverse and have great quality stuff…cheese (of course), cheese related products, meat, vegetables, baked goods, etc. Third, the crazies come out…and I do mean crazy. Given how reserved our friends north of Waukegan usually are, it’s amazing to take in extremely leftist impromptu poetry slams and the like for a few minutes while strolling the square.
As for “can’t miss” product around the market…try: spicy cheese bread, homemade beef jerky, dill cheese curds, and fresh pasta and pesto…and don’t forget to stop by the husband and wife duo making fresh kettle corn, literally from a kettle that probably dates back to the Civil War.
After the Farmer’s Market, I highly recommend walking around Madison itself. It’s a great town full of the life of UW. Then, it’s off to Middleton, a fair sized town just west of Madison which has felt the positive effects of a building boom. If you take Route 12/14 from Madison to Middleton (aka “The Beltway”) and get off at University Avenue, you’ll find all the comforts of generic suburbia, with plenty of name-brand hotels, shopping and restaurants. This is a good base of operations for the second leg of the trip…a night of outdoor theatre.
Theater? Theatre? I’m not really sure which word is correct in this instance…but I’m talking about the American Players Theatre in Spring Green, Wisconsin…a 30 minute drive from Middleton along a very rural stretch of Route 14. The basics: an outdoor theater tucked into the side of a hill where a company of actors and actresses puts on very respectable Shakespearean plays and English Comedies (not The Office or Coupling…think more like George Bernard Shaw) throughout the Wisconsin Summer.
On your way back to Chicago, hit up the Cracker Barrel in Janesville just for fun.
Oh…and just in case you’re feeling really adventurous, skip staying in the comfort of corporate-invaded Middleton, and opt for the hominess of summer-only motels in and around Spring Green. These places do their business in the summer during play season catering to the tourists and are about as mom and pop as it gets. Clean and safe…but not updated since the 1970s…worth a shot for sure.
Chicago Home Buyers: Buy a House get some Dough (Maybe)
Ahhhh…the stimulus package. Better known as the “American Recovery and Reinvestment Act.” The centerpiece of Barack Obama’s first hundred days in office. And maybe a big slice of dough for you…if you buy a house…maybe.
Here’s the quick and dirty:
-You’ll probably qualify for the full $8,000 credit unless you’re buying a mobile home or a dog house.
-If you’re married and you and your spouse combine to make more than $175,000, don’t pass GO and don’t collect $8,000 (or single and you make more than $95,000). In this case, you’re completely phased out of the credit. Partial phaseout begins at $150,000 for married couples and $75,000 for single folks.
-You don’t have to be married to take the full credit and it can be allocated among the non-married purchasers, but if you buy a house with someone you’re not married to then you better have an attorney prepare a cohabitation agreement.
-The credit is only good for purchases of principal residences…so it’s no good for buying a cottage on Lake Geneva.
-This is theoretically a “first-time homebuyer credit” but IRS is funny, and they define “first-time homebuyer” as anyone who has not owned a principal residence in the US for three years prior to closing on the new home.
-Oh…and if you want to get the credit, you need to close on a home on or before November 30, 2009. Having a contract isn’t good enough…you have to actually close before the deadline.
So there it is…your tax dollars coming back to you to buy your own little slice of heaven.
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Chicago Real Estate: Good Clean Unclouded Marketable Title
So you want to sell or buy some real estate, but your attorney keeps talking about “exceptions to title,” “clouds on title,” “bricks on title,” “clean title,” and everything in between. What is he or she talking about, and why is it stopping you from buying or selling a property?
Title History and Title Reports
Every property has what is known as a “title history” contained in the public records of the county where the property is located. Think of this as CARFAX for real estate. Property records in some counties date back to colonial times and are full of deeds and other documents going back to the original owners.
The title history is important because within it lies every booby trap, pitfall and tripwire that might make your purchase of the real estate a bad investment. For example, a house is usually purchased with some cash from the buyer and a mortgage loan. At closing, the bank provides the loan funds and records its mortgage on the property’s title. After the mortgage is recorded with the county recorder, it will show up in the title history of that particular property to let everyone know that Goliath National Bank has a mortgage outstanding on the property.
Why is this important? Because when you go to buy a house, your attorney will receive from a Title Insurance Company (whose business it is not only to sell title insurance, but also to be the primary source of usable information about title histories) a Title Report. The Title Report will show all of the active “exceptions to title” in the title history. An exception to title is something recorded on the title of the property which serves as public notice that another party has an interest in the real estate other than the owner. For instance, the above-described mortgage provides Goliath National Bank with a priority in the real estate greater than anyone else. A new buyer would not be able to come in and buy the property from the owner without first making sure Goliath National Bank’s mortgage is paid off.
So when your attorney starts talking about “exceptions to title” he/she really means to say that there are other parties with interests in the property that have to be dealt with before you can get “marketable title” or “good title” or “clean title” (there are many synonyms in Real Estate Law) to the property.
Clean Living (and Title)
The good news is really two-fold: First, in about 99% of real estate deals, all of the exceptions to title are cleared up at closing so owners do not need to worry about them; and Second, unless your lawyer commits malpractice or there is some special circumstance, the Title Insurance Company (biggest one, Chicago Title and Trust) will insure your title, which means that if some exception to title comes out of the woodwork to upstage your claim to the property, you can get some or all of your money back.
