The renowned American industrialist John Rockefeller once said: “Own nothing, but control everything.” This statement has become a fundamental rule of asset protection for many years and one of the pillars of the asset management industry.
Nexxess Business Advisors, led by Scott McGrath MFP® CTEP® CWM®, aims to apply this nugget of wisdom to protect the financials and assets of its clients, giving them security and the ability to maximize profit. This philosophy is the root of Nexxess’ approach, where the trust holds the business’ assets, both tangible and intangible, while the business owner retains control without direct ownership. This minimizes tax liabilities as well as shields the business owner personally from lawsuits.
Another area the company specializes in is helping companies sell their businesses via a specialized trust, which helps them avoid getting hit by capital gains tax on the sale. McGrath explains: “You can avoid the capital gain tax on the sale, if you can avoid the taxable event altogether, allowing the sale to proceed with significant tax advantages.”
Because it restructures businesses using trusts, Nexxess ensures that the business’ assets are under the trust before the sale. This approach means that, when a buyer purchases the business, they are technically acquiring the assets from the trust and not directly from the seller. The transaction is considered an asset sale rather than a stock sale.
Thanks to its deep industry experience, Nexxess can help restructure a business, without essentially changing how the business operates. Oftentimes, people get confused about restructuring, with a belief that restructuring would result in a fundamental change in how a business works. McGrath emphasizes: “We do not change the business operations; we change the corporate structure for the purpose of maximizing profit.”
While many traditional business advisors may suggest operational changes that generally disrupt income streams, Nexxess makes sure that the core operations of a business remain stable and intact, while it restructures the business to improve profitability. He adds that, for a business to thrive and scale, it must learn to control profit first and foremost.
Additionally, Nexxess’ approach provides a significant advantage in the form of deferred capital gains taxes.
McGrath says: “99% of the time when a company is sold in the US, the seller needs to pay around 30% in capital gains taxes. Our structuring makes sure that business owners can complete the sale while avoiding the capital gains taxable event itself.”
Conventionally, the process of selling a business involves hiring a broker and incurring capital gain taxes, which could take up to 40% out of the net proceeds of a sale. Nexxess can remove the need for brokers and agents when selling a company with its extensive network of corporate buyers. By taking out the broker and avoiding the capital gains tax, sellers can walk away with the money they need in order to sell the business.
Many business owners rely on CPAs for corporate structuring, and they often recommend forming S corporations to avoid taxation. According to Mcgrath, the S corporation forces W2 income on the business owner, which is one of the highest forms of tax. He argues that, if the business owner revokes the S election and restructures the way profit is taken from the business, they can reduce the taxable income drastically, allowing the company to scale profit.
“When it comes to financial planning, you shouldn’t think of strategy like amateurs do,” he says. “You must think ‘details’ in order to maximize profit.”
