How Does It Work?

Even if you are currently in a W-2 environment, your business can be evaluated for its EBITA. It is a relatively simple calculation that determines the actual profitability of your business if you were not under the umbrella of your firm.

The IRS recognizes that Advisory businesses qualify for Capital Gains treatment through a framework called multi-period net excess earnings (MEEM), which is rooted in the emerging concept of Advisor "Goodwill".  The difference in taxation is substantial.

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Under ordinary income treatment, selling your practice means paying 50% or more in federal and state taxes. Under a Capital Gains structure, that drops to 20% at the Federal level. 

The field of Acquirers is expanding with some of the most elite names in the business, including Goldman Sachs and BNY Mellon. Lastly, there are P/E firms with ready cash to invest in strong EBITA businesses.

You can choose to establish your own ADV, partner with an existing, or enter a sort of hybrid relationship with A+ brands on the Street. Whichever path you end up pursuing, you will be both recognized for your Capital Gains premium at point of sale, as well as establishing a brand new Basis should you choose to take money off the table down the road.

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Reach out today to calculate your Capital Gains valuation.