Recently we had a client come to us who was in the process of negotiating the sale of her closely held business for several million dollars. The client was completely ethical, honest and an excellent business person. She was excited to be able to sell her business after many years of sacrifice and dedication building the business and making sure that it was successful. When we discussed both the tax and legal ramifications of selling the business, the issue of Asset Protection Planning came up.
This issue is very critical for sellers of businesses because there may be some “buyer’s remorse” after the sale and the buyer may make some claims for misrepresentation or fraud against the seller. The purchase price the seller receives needs to be protected. Accordingly, we recommended to this client that she set up an Offshore Trust with Offshore LLCs in which to deposit some of the sale money. She was very appreciative of our suggestion and retained us to set up the structure.
Sure enough, several months after the sale was completed, the buyer came back demanding some sort of an offset or compensation for what the buyer deemed to be a misrepresentation or falsehood on the part of the seller. Because of the structure that the seller had set up, she was very grateful that her funds were protected as the result of the techniques and strategy that we implemented on her behalf. She was able to settle the matter for a nominal amount, but, it was certainly appropriate for her to have taken the Offshore Planning strategy that we recommended in order to protect her hard-earned funds from the sale of the business that she has spent her lifetime developing.