$800k income from biz sale

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777
Posts: 8
Joined: Tue Jul 04, 2017 7:36 pm

$800k income from biz sale

Post by 777 » Tue Jul 04, 2017 7:48 pm

Hello,

I'm 29 y/o Bogler. Long time, no post. I've used you guys and gals for nearly three years to allocate the $50k or so I've had in Vanguard.

The company I've devoted my life to for the past couple of years is likely to be sold in the next week or so. Yes, these things can fall apart at any time, but the way things are headed, I'm liklely to come away with about $800k and then some new stock in acquiring company.

I've read lots of windfall advice, but what else am I missing? I'm particularly interested in tax shelters / avoidance, since I'm likely buying a new house this year or maybe even trying my hand at development in the coming years. Can I move money to any LLCs or investment properties that I might use later? While I'm figuring out what to do next over the next couple of months, I'm planning to park it all in Ally high yield savings.

You all love giving advice. What do you have for me? Thank you so much for your help. :beer

123
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Joined: Fri Oct 12, 2012 3:55 pm

Re: $800k income from biz sale

Post by 123 » Tue Jul 04, 2017 8:14 pm

Will you still have a job in the business after the acquisition or do you go out the door with the acquisition?
The closest helping hand is at the end of your own arm.

snarlyjack
Posts: 780
Joined: Fri Aug 28, 2015 12:44 pm
Location: Montana

Re: $800k income from biz sale

Post by snarlyjack » Tue Jul 04, 2017 10:17 pm

777,

Welcome to Bogleheads!

When my Mom died, I inherited some money. It took me a
couple of years to think through the whole thing. I studied/read
Jack Bogle, Warren Buffett, Kevin O'Leary, Ronald Read (The Janitor
Next Door), The Chicagoan (Walgreens), Bogleheads, + some others.

I would suggest that you take your time & think through the whole thing.
In my case I made a investment, someone else talked me out of it.
Then I ended up going back to my original investment. Think things through.

Here is a interesting article on Wellington. I'm not suggesting that you
invest in Wellington but wrap your mind around the philosophy...

Have fun & enjoy the process!

http://theconservativeincomeinvestor.co ... -all-time/

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Pranav
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Location: Texas

Re: $800k income from biz sale

Post by Pranav » Wed Jul 05, 2017 12:59 am

https://www.bogleheads.org/wiki

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patriciamgr2
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Re: $800k income from biz sale

Post by patriciamgr2 » Wed Jul 05, 2017 1:51 am

At a minimum, split the funds among banking institutions to ensure you have FDIC protection. Savings should never be at risk.

Tax planning may be best accomplished through structuring of the sale agreement--are you represented by counsel? Do you have a CPA who is knowledgeable about current and proposed tax laws? What are the tax implications (all long-term cap gains in current year?) of the sale itself as the agreement is structured currently?

Be sure you keep reserves in cash to pay that IRS bill. Paying for specific tax advice before signing the contract is a worthwhile investment IMO.

LLCs are asset protection devices & they are a good idea for holding investment real estate--if and when you begin to buy properties. Under current law, most real estate investors I know use them as pass-throughs for tax purposes.

Do you have any debt? How will you pay living expenses once the sale is completed? What price house were you considering buying & how would you finance it? Those questions will help you decide how to allocate the after-tax proceeds. If you provide more detail, Forum members can comment in more detail.

BTW, congratulations on your achievement! Good Luck.

777
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Joined: Tue Jul 04, 2017 7:36 pm

Re: $800k income from biz sale

Post by 777 » Wed Jul 05, 2017 7:16 am

123 wrote:Will you still have a job in the business after the acquisition or do you go out the door with the acquisition?
Nope, my job sticks around, so I'll still be brining in around $150k a year.

I also don't really have any debt other than about $6000 left on a Toyota.

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BolderBoy
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Re: $800k income from biz sale

Post by BolderBoy » Wed Jul 05, 2017 8:54 am

777 wrote:
123 wrote:Will you still have a job in the business after the acquisition or do you go out the door with the acquisition?
Nope, my job sticks around, so I'll still be brining in around $150k a year.

I also don't really have any debt other than about $6000 left on a Toyota.
Pay that off right away. Debt-free is good.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

niceguy7376
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Location: Metro ATL

Re: $800k income from biz sale

Post by niceguy7376 » Wed Jul 05, 2017 4:35 pm

777 wrote:I've read lots of windfall advice, but what else am I missing? I'm particularly interested in tax shelters / avoidance, since I'm likely buying a new house this year or maybe even trying my hand at development in the coming years. Can I move money to any LLCs or investment properties that I might use later?
If you are thinking of moving the money to LLC and thus not pay taxes on that 800K, then I dont know if that is possible. Who is the owner of the company that is being sold? You as an individual or is there a LLC already that controls the biz?

Once you pay the taxes, you can do what you want (setting up LLC to start investing in real estate).

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unclescrooge
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Re: $800k income from biz sale

Post by unclescrooge » Thu Jul 06, 2017 12:34 am

777 wrote:

I've read lots of windfall advice, but what else am I missing? I'm particularly interested in tax shelters / avoidance, since I'm likely buying a new house this year or maybe even trying my hand at development in the coming years. Can I move money to any LLCs or investment properties that I might use later? While I'm figuring out what to do next over the next couple of months, I'm planning to park it all in Ally high yield savings.
Congrats on the windfall.

My rudimentary knowledge of taxes tells me that you should never let them wag the investment dog.

You may be able to set up a corporation, fund it will your stock, sell the shares and then pay yourself a salary from the income. Of course this would likely end up with a higher tax liability, so you would defer it via some complicated deferred compensation scheme which might involve an annuity and a commission, or a cash-balance plan.

I've heard these schemes being pitched enthusiastically by CPAs with insurance licenses, but I doubt you'd come out ahead in the long term.

Pay your long term capital gains and be done.

777
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Joined: Tue Jul 04, 2017 7:36 pm

Re: $800k income from biz sale

Post by 777 » Thu Jul 06, 2017 8:05 am

Thanks for throwing your ideas out. Meeting with tax planner on Friday, so we'll see how that goes.

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