Estate Planning

For the owners of closely held companies succession and estate planning are seen as largely synonymous. The primary estate planning objectives of such individuals include providing for liquidity for themselves and their heirs, providing for the continuity of the business, and minimizing federal estate and gift taxes and state inheritance taxes. If you are facing this situation now is the time to develop an exit strategy and estate plan that will maximize the value you receive while minimizing the tax bite. Martinet Recchia, Inc.’s estate and gift tax valuation services assist business owners in preserving their wealth. By utilizing our knowledge and experience, we strive to minimize the tax consequences, while continuing to meet the personal desires of the client.

   Exit Strategies

The first step in succession planning is creating your exit strategy. This involves creating a plan for passing on responsibility for running your company, transferring ownership and extracting your money. A smooth and stable transition is required to maximize your investment. This requires planning while your company is in good economic health.

We will advise you as you choose and implement your exit options.

The following are the most common exit strategies.

  • Giving interests to family members
  • Selling the business to family members
  • Management Buyout
  • Employee Stock Ownership Plan

Buy/Sell Agreements

Many owners realize the importance of having buy-sell agreements in place for their companies but few realize the problems caused by poorly thought out agreements. It would be great if the future took care of itself however in the case of buy/sell agreements the future depends on how you act today. Carefully crafting a buy/sell agreement for your business now will ensure that the future won’t pose problems you aren’t prepared to face. A well planned regularly update valuation of the business is essential to a sound buy sell agreement.

Owner’s can set their price in several ways:

  • Objective Formula
  • Independent Valuation
  • Agreement by PartiesDiscounts (click)

When your estate planning involves a business valuation you need to be clear about the business interest being valued and how discounts work. The most common discounts are for a minority interest and the lack of marketability of an interest. These discounts are distinct and separate and are not guaranteed.

These reports include discounts for minority interest and marketability, as well as blockage discounts for ownership of securities in publicly held corporations. Each situation is different and a valuation professional needs to carefully consider which discounts apply and to what extent. The following factors affect the amount of discount that may be applied when evaluating a business.

Availability of willing buyers and sellers

  • Profitability of the business
  • Number of Owners
  • Number of Similar Transactions
  • Size of Minority Interest


Many business owners undervalue their companies for gift and estate taxes. However this can be costly and have severe financial consequences. In determining the fair market value of a business the IRS wants to see more than a number. It wants to see the methodology, theory and evidence behind the number. Business owners and executors should legitimize the appraisal process by engaging a qualified valuator to value the business. This will help to ensure that the value determined is supportable should the IRS question it.

Tax Due Dates