Partnership Buyout Plan

When it’s time for owners to leave a business, it’s often difficult to negotiate the sale of their interest. Finding a way to pay for it is even harder. By implementing a cash balance plan, you can help future buyers prepare to buy out a retiring owner, while simultaneously helping soon-to-be-retired owners or highly skilled employees save more for their looming exit. It’s a win-win.

  • How it works: upcoming retirees

    A cash balance plan can be added to an existing 401(k) plan and allow owners to make substantial retirement plan contributions—somewhere in the neighborhood of $150,000 to $200,000 a year if so desired. When they’re time comes to retire, they should be in a better position to enjoy retirement.

  • How it works: younger owners

    But younger owners don’t need huge contributions—they need after-tax dollars to buy out retiring partners. And cash balance plan contributions are a tax-deductible expense for the firm and its remaining younger business owners. The deposits are least tax-deferred until the retiring seller starts spending the money years later in retirement. When cash balance plans are used to fund the buyout of a senior partner, younger partners can treat the substantial retirement plan contribution as installment payments for their ownership interest.

  • Who can use the strategy?

    This strategy can be used by a number of business setups, including multiple senior partners transitioning their ownership shares to junior partners, as well as changes of ownership within a family business.

Start reducing the buyout burden one bite at a time with a cash balance plan and help older owners better prepare for retirement. We’re always here to help. Please call one of our Investment Representatives to discuss your options.