Building a company from scratch to a successful enterprise comes with an extraordinary sense of accomplishment and joy -– a joy only rivaled by the possibility of selling the business.
Most entrepreneurs spend years of commitment and hard work growing a business in order to have an exit ramp and justify the years of dedication. Therefore, an entrepreneur’s most crucial choice is planning and successfully executing a liquidity event.
A liquidity event is a process that shows a company’s shareholders the value of their investment, like mergers, acquisitions, and initial public offerings.
Liquidity event planning is the planned activities and decisions employed to make the transition and life after the sale seamless, and this is where advisors can help business owners.
At Interactive Wealth Advisors, our professional advisors view this change as a unique opportunity to engage with their clients’ emotional, relational, and generational needs.
Consider these steps to ensure this sudden inflow of wealth suits your long-term goals.
Although a liquidity event will increase your independence, you will require a team of liquidity planners to ensure a smooth transition and constant growth and maintenance of your wealth from the event.
Ensure you hire an independent Oregon investment management professional in your wealth advisory team.
The valuation of your equity is a crucial stage in liquidity planning. However, consider any valuation discounts on your equity ownership for estate planning purposes.
Every discounted valuation is advantageous since it will lower the sale’s practical tax obligation and reduce estate taxes.
A thoroughly created estate plan should show how much money should be allotted to philanthropy, family gifts, retained wealth, and tax payments. Consider setting up a revocable trust to protect your assets, skip probate, and create a strategy for asset distribution.
These legal entities are essential in transferring assets in a way that reduces estate taxes and preserves your fortune for future generations.
To fund the lifestyle you choose after the liquidity event, you must decide on your long-term financial objectives. After the event, your capital should be split between a core and an excess capital account.
While the core capital is the number of assets required to support your desired standard of living and financial objectives, the excess capital is the asset for philanthropic and Roth IRA conversion estate planning.
You will need a strategic asset allocation and customized holistic financial management for the liquid proceeds from the liquidity event. This strategic asset allocation considers the capital market expectations and balances them with your risk tolerance, return objectives, investment goals, and limitations.
Interactive Wealth Advisors is a Portland, Oregon-based fee-only business that provides financial planning services.
Whether it is a public or a private business, our team is devoted to providing you with clear, actionable advice on every step of your transition.
We can also offer personalized suggestions on sudden wealth protection after a liquidity event.
Here are some of the best practices for liquidity event planning:
Like many other financial decisions, you should start early. For example, the sooner you make IRA contributions the more you’ll have for your retirement. The early bird does get the worm or best deal in this case.
Your newly acquired funds will come accompanied by an opportunity to design tax strategies to create a financially sound, tax-efficient, compliant plan.
A properly designed tax strategy will pay huge benefits over the short-, medium-, and long terms. One that isn’t planned out can lead to lost opportunities and costly mistakes.
Risk and return are the opposite yet unchanging principles of creating a portfolio. So, when your money starts to work for you, put just as much thought into capital preservation as you do capital growth.
Interactive Wealth Advisors’ liquidity event advisors can assist you in creating a portfolio that meets your risk and investment goals.
Changing from an active business owner to an investor that delegates investment responsibility can be difficult after a liquidity event. Although it may seem passive to have someone else making the day to day decisions, making your money work harder and smarter for you is not. Take the time to enjoy the fruits of your labor and LIVE!
Our liquidity assessment and planning is mainly for entrepreneurs or business owners looking to take control their finances and make smarter financial decisions, including the baby boomer generation that owns over 40% of all private companies in the U.S.
To help with the planning for a successful liquidity event, we offer the following perks:
We are your one-stop shop for your liquidity event planning in Portland, Oregon. Our dedicated team is focused on giving you the finest results and offering excellent customer service.
Our team at Interactive Wealth Advisors has extensive knowledge in personal finance topics, including investments, estate planning, life insurance, retirement plan advising, and more, to aid your seamless transition and improve your future financial situation.
We can offer professional guidance specifically customized to your needs, whether you need assistance managing or growing your existing portfolio or managing your retirement funds.
We will help you create a cash-flow strategy that enables you to maintain your current lifestyle and makes provisions for future income. We will also create a diversified portfolio that balances your short and long-term goals.
You can keep control over how you share, safeguard, gift, and retain your assets over the long term by creating a thoughtful estate plan.
We can help you make this decision after considering your hopes for your family, your thoughts on philanthropy, and what groups and causes are important to you.