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Two-thirds of wealthy business owners have stepped up their plans to retire or sell their businesses during the Covid pandemic, new survey finds, reflecting the new psychological and financial landscape for businesses.
According to a Clarfeld Citizens Private Wealth survey, 66% of wealthy business owners said the pandemic had advanced their plans to sell their business or retire.
Half plan to sell their business in the wake of the pandemic.
The survey looked at 150 business owners with net worth of at least $ 2 million and investable assets of $ 5 million more. It was performed online in July by Ipsos on behalf of Clarfeld, which provides banking and wealth management services to high net worth individuals.
Clarfeld said wealthy business owners have come to value their time and family more during the pandemic and have made the decision to retire from work and business.
“They reset their priorities,” said Joannie Bozek, director of trust services and director of trust at Clarfeld. “Their mortality has become more real.”
Tax uncertainty and the growing likelihood of increased taxes on the wealthy are also adding additional pressure on business owners to sell. President Joe Biden, the Senate and the House have all proposed an increase in the capital gains tax rate and potential inheritance tax changes, which would increase the tax burden of any business sale. Biden and Democrats in Congress are also proposing higher tax rates for top earners.
“They realize that, for those who are successful, now is the time to monetize this business,” Bozek said.
Most plan to hand over their businesses to family members. At least 88% of those polled said they plan to hand their business over to a family member, including spouses, children and grandchildren.
The pandemic and the threat of a tax hike have also prompted business owners to consider relocating. Two-thirds of wealthy business owners surveyed said they moved their businesses during the pandemic. The main reason: taxes, 34% of them moving to lower tax states. The second reason was to be closer to family and the third was remote work, which offers more flexible locations.
Of course, not all businesses can relocate, and Clarfeld’s investigation was heavily concentrated in the areas of services and technology, which are easier to move. Still, three-quarters of business owners surveyed plan to physically relocate their business within the next three to five years, especially if taxes rise, making heavily taxed states like California, New York, and New Jersey less. attractive.
“Remote work easily led to ‘where do I want to live?’”, Said Bozek. “If taxes go up and the economy is more affected, I think this trend will continue.”
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