At Entrust, we create a value-added story for each of our clients based on careful listening, comprehensive knowledge, and a problem-solving approach. The case history below is the result of real solutions that we applied to a client’s portfolio, and is representative of the solutions we can put to work for you.
A successful manufacturer of steel products for the construction industry has three sons, two of whom are active in the business both as shareholders and as co-managers. One other significant employee also owns a small percentage of the business.
The shareholders were dissatisfied with the lack of advice they were getting from their accounting firm. Any creative solutions they implemented were at their own suggestion; their accounting firm seemed interested only in preparing their financial statements and tax returns. Both the clients’ lawyer and banker recommended that they switch to Entrust.
The business owner came to us requesting guidance on estate planning; he also wanted to provide for the third son who did not have an interest in the business.
Entrust designed an estate plan for the business owner that enabled him to minimize future estate taxes while maintaining control of his wealth. We also helped him determine how to equalize the treatment of his third son.
As we continued to work with the owner, we saw opportunities for improvement in other areas and we helped him:
- double his use of the small business deduction by setting up a non-associated sister company. He was able to make use of the low tax rate twice, once in each company.
- establish the terms of a shareholder’s agreement and arrange insurance funding for it. In setting up the agreement we had to take into consideration the differing ages of the shareholders and the family relationships.
- set up a new holding company that became the secured lender to the active companies. This enabled the operating company to pay their entire retained earnings to the holding company on a tax-free basis. The holding company then lent the amount back, taking as security some of the operating company’s assets and effectively “creditor proofing” the active company.
- upgrade the company’s accounting and computer systems.
- undertake financial planning for each of the shareholders to ensure that their early retirement objectives would be met.