Advising entrepreneurs : dynamic strategies for financial growth

Preface xiii Part One The Financial Advisor’s Role 1 CHAPTER 1 The Regulatory and Ethical Environment 3 Duties of a Fiduciary 4 Initial Interview 6 Compensation Approaches 7 Engagement Letter 9 Conflicts of Interest 10 CHAPTER 2 Financial Management and Planning 13 Pre-Start Analysis 14 Entrepreneur as Manager 16 Evaluating the Enterprise 19 Eventual Harvest 24 Part Two Shaping the Venture’s Financial Structure 27 CHAPTER 3 Using the Tools of the Accountant 29 Break-Even Analysis 29 Forecasting Models 31 Analyzing Financial Statements 32 Managing Cash 37 Managing Receivables 41 Managing Inventory 43 Managing Liabilities 44 Managing Capital Assets 46 CHAPTER 4 Entity Design Choices 49 Tax Considerations 50 Sole Proprietorship 51 Partnership 52 Corporation 56 Limited Liability Company 64 CHAPTER 5 Private Placements 69 Federal Exemptions 70 Private Placement Memorandum 74 CHAPTER 6 Venture Capital 77 Venture Capital Marketplace 78 Business Plan 79 The Venture Capitalist’s Valuation Process 80 Venture Capital Agreement 82 Employment Agreement 83 Shareholders’ Agreement 84 CHAPTER 7 Bank Loans and Debt Alternatives 87 Characteristics of Debt 87 Sources of Debt Financing 88 Creditworthiness 90 Types of Loans 91 Leasing 92 Working Capital Funding 92 Selecting a Banker 95 Negotiating a Bank Loan 97 CHAPTER 8 Government Funding 101 Federal, State, and Local Funding Sources 102 Small Business Administration 104 Other Federal Opportunities 108 CHAPTER 9 Joint Ventures and Strategic Alliances 111 Alliance Strategies 112 Licensing 114 Identifying a Strategic Partner 115 Working toward a Strategic Alliance Agreement 116 Part Three Protecting the Entrepreneur and His or Her Assets 123 CHAPTER 10 Risk Management 125 Organizational and Operational Considerations 125 Developing a Risk Management Agenda 127 Insurance Principles 127 Insurance Strategy 129 Property Insurance 131 Liability Insurance 133 Insurance Benefits for Employees 135 Self-Insurance 137 Director and Officer Liability 139 Indemnity 142 CHAPTER 11 Valuing the Entrepreneurial Venture 145 Evaluation Methods 146 Valuing Assets 148 Valuing Liabilities 156 Determining the Purchase Price 158 CHAPTER 12 Buy-Sell Designs 167 Buy-Sell Agreement 168 Triggering Events 168 Funding the Buyout 169 Stock Redemption or Entity Agreement 170 Avoiding Dividend Treatment 171 Stock Attribution Rules 174 Redemptions to Pay Death Taxes 176 Alternative Minimum Tax 177 Accumulated Earnings Tax 178 Split-Dollar Redemption 180 Disadvantages of Redemption 180 Cross-Purchase Agreement 181 Trusteed Cross-Purchase 182 Partnership Cross-Purchase 184 Split-Dollar Cross-Purchase 185 Wait-and-See Buy-Sell Agreement 188 Employee Stock Ownership Plan 189 Estate Tax Deferrals 191 Premium Allocation 192 Valuation 192 Transfers for Value 195 Combining the Life Insurance Retirement Plan and the Buy-Sell 198 S Corporation Buy-Sell Issues 199 CHAPTER 13 Asset Protection Strategies 201 Ethical Obligations 201 Exempt Assets 203 Gifting Strategies 204 Choice-of-Entity Implications 205 Part Four Compensation Planning for the Entrepreneur and His or Her Employees 211 CHAPTER 14 Cash and Deferred Compensation 213 Bonuses and Deferred Compensation 214 Constructive Dividends 215 Company Retirement Plans 217 ERISA Compliance 222 ERISA for Deferred-Compensation Plans 235 ERISA for Split-Dollar and Executive Bonus Plans 242 Related Issues: Age and Sex Discrimination 247 CHAPTER 15 Equity-Based Compensation 251 Stock Options 252 Incentive Stock Options 252 Nonqualified Stock Options 254 Restricted Stock 258 Phantom Stock Plans and Stock Appreciation Rights 259 Part Five Managing Capital Events 261 CHAPTER 16 Buying or Selling an Entrepreneurial Business 263 The Client’s Objectives 263 Financial Information 266 Guidelines for Reviewing Standard Accounting Opinion 268 Contracts and Continuing Obligations 271 Leases and Properties 273 Federal Taxes 276 State and Local Taxes 278 Internet Domain Names, Patents, Trademarks, Trade Names, and Copyrights 280 Permits, Licenses, and Franchises 281 Liens, Judgments, and Deeds 281 Employee Benefit Plans 282 Unemployment Compensation Rating 282 Stock Certificates, Options, and Records 283 CHAPTER 17 Succession Planning 289 Federal Tax Rules 290 Tax-Deferral Opportunities 291 Valuation Strategies 292 Income-Shifting Techniques 293 CHAPTER 18 Initial Public Offering 303 Public Life 303 Preconditions 305 Registration Team 306 Registration Process 307 Nontraditional Alternatives 310 Index 313