Transcript:
When a client owns a business, you may want to model how selling that business affects their overall plan. In Voyant, this can be done by creating a What-If plan and using the Ownership Transfers section within the corporate asset.
This allows you to review:
- The proceeds from the business sale
- How the proceeds flow into the client’s cash or investment accounts
- The tax impact of the sale
- The change in corporate ownership over time
- The effect on cash flow, assets, taxes, and legacy outcomes
Option 1: Selling the Business All in One Year
To begin, go to the What If section and create a new What-If plan. This allows you to compare the business sale scenario against the client’s base plan.
In this example, we will model the client selling the business all at once.
Once the What-If plan has been created, go to the Corporate section and open the business model. From there, select Ownership Transfers.
Add a new transfer and select the event when the sale should occur. In this example, the sale is modeled at the client’s retirement.
When adding the transfer, you will have different options available. For example, the transfer can be modeled as a gift if the client wants to move business ownership into a trust, transfer ownership to another person in the plan, or transfer ownership to someone outside of the plan.
For this example, select Sale and model the sale of the full business at retirement. Save the transfer once the details are complete.
Reviewing the Sale in Year View
After saving the ownership transfer, go to Year View and review the year in which the business sale occurs.
In the Investments section, you should see the profit from the company sale flowing into the client’s cash account. If there is a sweep set up on the cash account, that money may then move into another account, such as a non-registered investment account.
Next, review the Taxes section. The tax outcome from the business sale will be shown as due at the end of that year. The tax bill will then be applied in arrears to the client’s expenses.
As a result, you may see the client’s taxes increase significantly in the year following the sale. This reflects the tax impact of selling the business.
You can also confirm that the business is no longer owned by the client by returning to the Corporate section. Open the business and review the ownership percentage. In the year of the sale, the ownership percentage should drop to zero. The year prior, it may still show as 100%.
Once the business has been sold, the corporate asset will leave the client’s plan worth beginning in the year of the sale.
Option 2: Selling the Business Over Multiple Years
You can also model the sale of a business over multiple years.
To do this, create another What-If plan. For example, you may name this scenario Selling the Business Over 3 Years.
Then go back to the Corporate section and open the client’s business. Select Ownership Transfers and add a new transfer.
This time, toggle off the option to transfer all ownership at once. You can then model the transfer of the full business value over a set number of years.
In this example, the client is selling 100% of the business over three years to someone outside of the plan, beginning at retirement.
Save the ownership transfer once the details are complete.
Reviewing a Phased Business Sale
Go back to Year View and review the year in which the phased sale begins.
In the Investments section, you should see money flowing into the client’s cash account. If a sweep is set up, the proceeds may then move into another investment account.
Because the sale is being phased over multiple years, you should see proceeds coming in across each year of the sale period.
You can also review the Taxes section for each year to see the tax impact related to that year’s portion of the sale.
To confirm the ownership transfer, return to the Corporate section and review the ownership percentage over time. You should see the ownership decrease gradually until it reaches zero.
Comparing the Sale Scenarios
Once both What-If plans have been created, you can compare the scenarios to see how each option affects the client’s overall plan.
Go to Let’s See and use the chart views to compare:
- Selling the business all in one year
- Selling the business over three years
You can review the Cash Flow chart to confirm whether either scenario creates cash flow issues.
You can also review the Assets chart to see how the assets change over time under each scenario.
The Taxes chart can help illustrate how the tax impact differs between selling the business all at once and phasing the sale over several years.
Reviewing Legacy Outcomes
You can also compare the legacy impact of each business sale strategy.
Go to Overview and then select Legacy. From there, compare the legacy outcomes between the two What-If plans.
This can help you review:
- Estimated terminal tax
- Total wealth transfer after tax
- Estate transfer details
- Expected taxes
- Valuation summaries
- What may transfer to heirs under each scenario
Use Show Details to expand the results and review the breakdown in more detail.
Requesting Support
If you have questions while reviewing or modeling this workflow, click the client’s name in the top-right corner of the screen, then select Request Support.
Enter your question in the text box and share client access so the support team can review the plan with the appropriate context.