Help info on buying into a business

When I was looking into buying into a local company, I spoke to a well respected business owner I knew and ask his advice. Perhaps you son knows a business owner our two he would be comfortable talking to.

This is a complicated area, a good start would be speaking with a CPA or tax attorney to understand the tax consequences. Many small businesses are organized as LLCs or subchapter-S corporations and that has a direct impact on owners' tax returns.

More generally these are often completely illiquid investments so your son should understand what benefit (if any) there would be to being an owner. If it leads to more complicated tax returns, no new money, and a leash that discourages him from moving to a new job, it might not be so appealing.

These are all matters that a local attorney who works regularly with small business owners could address.

-Tad

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You said "buy".

What are the benefits to your son? Is there a salary increase also? Are there voting rights, and if so, is it realistic that his vote will ever count? I'm guessing he would get a pro-rata share of the profits. He needs to review the last few years tax returns. I know of many small business owners that expense so much stuff through their business that the company rarely shows a profit and they hardly draw a salary. Instead they make up for it through "benefits" (i.e. company vehicles). Is it likely they will ever sell? That's the real value of ownership in small business.

Perhaps this is a token conscession that has no real benefits designed to keep your son from leaving. Or perhaps it's the opportunity of a lifetime. As others said, consult a lawyer and a CPA.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.