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Health Checkup
Business Protec-on Strategies

September 22, 2012

Stephen B. Dunbar III, JD

Morristown, NJ

AXA Advisors

Jamal Barnes, Esq. amal S. Barnes, Esq. The Law Oces of J

East Orange, NJ

The Small Business Environment Small Business Protec5on Strategies Q & A

The BIG Business of Small Business

The 27.5 million small businesses in the United States:
Employ about half of U.S. workers Account for more than half of non-farm private Gross Domes5c Product (GDP) Hire 43 percent of high-tech workers (scien5sts, engineers, computer programmers, and others) Have generated 65 percent of net new jobs over the past 17 years Produce 16.5 5mes more patents per employee than large paten5ng rms

The impact of small business is growing, but

Source: U.S. Small Business Administration Office of Advocacy, Advocacy: the voice of small business in government Frequently Asked Questions,, January 2011.

Risky Business?
small businesses can also be more vulnerable to demographic and economic change.
3 out of 10 new employer establishments close within the rst two years.1 The annual Small Business Op5mism Index has been under 100 since 2006.2
1. U.S. Small Business Administration Office of Advocacy, Advocacy: the voice of small business in government Frequently Asked Questions,, January 2011. 2. NFIB Research Foundation, NFIB Small Business Economic Trends, February 2012.


All new ventures carry some degree of risk, but the rewards of entrepreneurship can be great!

Small Business ProtecOon Strategies

Financial Life Cycle:


Accumulation Savings Protection

Use EnOty Structures for legal protecOon Limited Partnerships Limited Liability Companies S-Corp C-Corp

Protect (contd)
Use Systems to Manage LiOgaOon Risk

Labor Laws and Discrimina5on Maintain Proper Documenta5on

Tax 3rd Par5es Partners

Conden5ality and Non-Compete Agreements


Protect (contd)
Involuntary or Voluntary Loss of Key Person - Who are the key people in your business - What are func5ons of Key People - What are the business impacts of losing the key people
- Sales - Prots - Value - Who are the Replacements


Protect (contd)
Assessing the Concern: For example, if your current business partner passes away, its possible that his/her spouse could legally become your new business partner The loss or departure of a key employee can mean the loss of prot, clients, proprietary knowledge and specialized skills

Protect (contd)
Assessing the Concern: 34% of Americans feel they will have to work to pay for living expenses during re5rement. There is a 46.7% chance that an employee aged 30 will be disabled for 90 days or more; 36% if aged 50 2

1 Scottrade, 2011 Scottrade American Retirement Survey Key Highlights, accessed March 2012.

2 2010 Field Guide to Estate Planning, Business Planning & Employee Benefits


Protect (contd)
Key ConsideraOons: How can these services protect my business? Buy-Sell Agreement Legal agreement that details what will happen at death, disability or re5rement of a business owner Key Person Coverage Insurance that protects the business against the death or disability of a key person in the business

Protect (contd)
More Key ConsideraOons:
Business Overhead Expense Disability insurance allows a small business owner to meet everyday business expenses, throughout the disability period Disability Buyout If a partner becomes disabled, policy provides funds to the non-disabled co-owner(s) to buy disabled partners share of the company


Liquidity to manage emergencies Group health insurance audit Par5cipate in industry associa5ons to get favorable pricing Student employees



Use en55es for nancial leverage pre-tax savings, manage income taxes Recruit and retain
Qualied Plan Non-qualies Plan Key Considera5ons


Accumulate (contd)
Key ConsideraOons: Which re5rement plan best suits your business? Simplied Employee Pension plan (SEP) Dened Benet Plan (tradi5onal pension) Savings Incen5ve Match plan (SIMPLE) Deferred Prot Sharing plan 401(k)

Accumulate (contd)
Key ConsideraOons: How can a business owner priori5ze these benet features? Deduc5bility Whether or not there is an employer tax deduc5on Control How much control the employer or employee has over benets Selectability How employers can select who receives certain benets

Assessing the Concern: Only 30% of family owned businesses survive the transi5on to the second genera5on, and about 12% to a third. A primary reason for this dismal survival rate lies in poor succession planning.
Source: The Family Business Institute, Succession Planning,, accessed March 26, 2012.

Transfer (contd)
ProtecOon Strategy: Wrijen succession plans outline legal, nancial and managerial considera5ons for transferring a business from one owner to the next.

Successfully transfer your business when you are ready to move on

Transfer (contd)
Assessing the Concern: The primary source of capital for most new businesses comes from savings and other personal resources.1 Approximately 75% of small business owners do not have a wrijen plan for re5rement, while only half have consulted a nancial professional to discuss their re5rement goals.
1. Small Business Administration, Finance Start-up accessed March 26, 2012 2. The American College, Small Business Owners are Unprepared for Retirement, February 2012.

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