Of all the things to consider when opening a franchise, one would think the least important would be the exit strategy. This is a great time to think about the end game.
When the lifecycle of a business ends, the goal for an owner isn’t about the money that’s been made, but the money that is available after the company is sold. And the time to understand the tax implications of a business shouldn’t be at the time of the sale; instead, it can be decided in the way the company is structured.
Funding will always be the biggest factor in opening a business. Without funding, a business can’t be purchased, inventory can’t be obtained, salaries can’t be paid. Funding is the key to getting a franchise from concept to reality, and adequate funding is the key to going from a new to an established business. And it’s funding that will get us through our retirement years.
For over 35 years, Benetrends has been at the forefront of ROBS (Rollovers as Business Startups) funding. Our innovative Rainmaker Plan® has given thousands of entrepreneurs the ability to open their franchises without incurring upfront taxes or early withdrawal penalties.
But the Rainmaker Plan isn’t the right funding vehicle for everyone. There are entrepreneurs who have the means to self-fund their franchise or are planning to use an SBA loan to fund their business. For this group of business owners, the funding portion offers little or no tax advantages. And that’s where we come in.
Benetrends introduced a new funding solution in 2018, known as the ROBS+™®. This program was designed using long-standing provision of the ERISA Act of 1974, to provide business owners with a way to build wealth, and allows for an exit strategy that dramatically lowers or eliminates taxes on the profits from the sale of the company. Candidates may ask “Why should I care about my exit strategy now? What are the advantages?” With this strategy, gains on the sale of the company may be 100% tax-free, or at the very least, greatly reduced. Plus, the gains from the sale can be invested and continue to grow tax-free, including making an investment in another business.
Modeled after the Rainmaker Plan, this strategy uses two types of stock, which gives candidates the ability to maximize wealth while minimizing tax consequences. Like the Rainmaker Plan, once the stock has been purchased, candidates have the capital to start, purchase or recapitalize their franchise. Although the process is simple, specific steps must be taken in order to ensure compliance with IRS/DOL regulations. And, as the leading franchise funding provider, Benetrends will work with your candidates and get them funded quickly, safely and economically.
So, what’s in it for you? The ROBS+™ offers benefits to help you grow your business as well.
- You can position business ownership as a better alternative than employment
- You can earn more referral income from Benetrends (no $50k minimum)
- You can develop more leads by positioning this as a tax advantage with accountants and investment advisors
At Benetrends, our primary focus is to provide clients with the tools and resources that allow them to “fund the business and fuel their growth”. To learn more about the ROBS+™, schedule a consultation.
This article originally appeared in the January 2019 edition of Franchising World Magazine