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Business Owners FocusTurning Your Wealth Into an Enduring Legacy You put time, energy, and passion into growingyour business. Let us help you get to what comes next. At William Blair,our wealth advisors work with business owners to turn that hard work into an enduringfinancial legacy. Assembling a coordinated team of advisors is essential to achieving a coordinated approachto planning. There are many vehicles and methods that business owners can use to maximize impact, andeach approach carries a unique set of advantages and disadvantages. T R A NS AC T I O N PL A N N I N G •How to Develop the Right Personal Wealth Strategy Before a Business Liquidity Event•How Annual Lifetime Spending Affects Your Wealth•Benefits of Personal Wealth Planning Before Selling Your Business LEG AC Y PL A N N I N G •How a GRAT Transfers Business Growth to Future Generations•Comparing Charitable Giving Strategies•Navigating Your Way to the Next Level of Wealth How to Develop the Right Personal Wealth StrategyBefore a Liquidity Event To turn hard work as a business owner into an enduringfinancial legacy, it is important that you begin talkingwith your wealth advisor about 18 months before sellingyour business or completing a dividend recapitalization.Assembling a coordinated team of advisors, includingexperts in wealth management, estate planning, taxplanning, and investment banking, is essential to achievinga coordinated approach to planning for the liquidity event. Consideration 1: Establishing Your Vision Before you and your advisors can create a strategy formanaging the wealth created from a sale, you needto identify your priorities and goals. This includesunderstanding how much capital is required to fundyour lifestyle, as well as whether transferring wealth toloved ones or gifting money to charities are priorities. Time is your most valuable resource—the earlier youstart wealth planning, the more opportunities you have.Conversely, if you wait until the transaction is aboutto close, you may miss the opportunity to capitalizeon some of the most valuable strategies and pay moretaxes than necessary. This piece discusses the severalconsiderations to make pre-transaction. A central part of this exercise is thinking about how youwill balance your lifestyle needs versus secondary goalsof wealth transfer and philanthropy. Another importantelement is deciding whether you want to continue workingafter the transaction or whether you will count on yourinvestment portfolio to generate a steady paycheck tosupport your lifestyle. You do not want to feel rushed into making decisions thatwill likely have long-term consequences, and you do notwant to be thinking about these things for the first timewhen you are in the midst of trying to sell or recapitalizeyour company. EXHIBIT 1 How to Develop the Right Personal Wealth StrategyBefore a Business Liquidity Event(continued) Consideration 2 : Making Wise Wealth DecisionsWhy Does My Wealth Advisor Need Time to AssessMy Business Sale? Whether the proceeds from a transaction are treatedas long-term gains or ordinary income will have asignificant effect on the overall tax exposure for theowners. The top federal long-term capital gain rate is20% plus potential exposure to a 3.8% tax on investmentincome. In contrast, the top federal rate for ordinaryincome is currently 37%. You may want to involve your wealth advisor about 18months before your business sale to allow for time to assessthe tax and cash flow timing consequences of potentialtransactions. This also gives your advisor time to createprojections for how much after-tax wealth you will receiveunder a range of valuations and transaction structures. Wealth advisors can also help you understand elementsof a purchase agreement that affect the ultimate valueand timing of the liquidity, such as rollovers, vesting,and earn-outs. Your advisors’ work to assess the deal structure isespecially important for transactions that are not all-cashdeals and involve equity compensation or earn-outs. Youalso want to give your wealth advisor adequate time to laythe groundwork for establishing any trusts, foundations,and other legal structures that will be used in executingyour wealth-management strategy. Consideration 3: Transferring Business ValueCan I Benefit From a Valuation Discount WhenTransferring Business Shares? One of the most powerful wealth-transfer strategies forowners of growing businesses is taking advantage ofthe pre-transaction “valuation discount,” an importantconsideration. The valuation discount is based on thepremise that the value of the business before a transactionis often less than the value at which the company is sold. How to Develop the Right Personal Wealth StrategyBefore a Business Liquidity Event(continued) When transferring shares of a company to children orother loved ones, the size of the gift for estate-tax purposesis based on the value of the shares at the time of thetransfer. Any appreciation in the value