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Small Business Protection Strategies

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Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independ4ent tax advisor.

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The Small Business Environment

Four Main Areas of Risk for Small Businesses

Protection Strategies for the Four Main Areas of Risk Benefits of Business Planning and Five Tips on Getting Started

AXA Advisors & Small Businesses

Q & A

Today’s Discussion

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The Big Business of Small Business

The 26.8 Million Small Businesses in the United States:

Employ about half of all private sector employees

Account for more than half of non-farm private gross domestic product (GDP)

Have generated 60-80% of net new jobs annually over the last decade

Produce 13 times more patents per employee than large patenting firms

The impact of small business is growing, but…

Source: U.S. Small Business Administration, Office of Advocacy “Frequently Asked Questions”, August 2007

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Risky Business?

1/3 of new employer establishments close within the first two years.1

The annual Small Business Optimism Index has declined every year since 2004.2

1 U.S. Small Business Administration, Office of Advocacy “Frequently Asked Questions”, August 2007

2 “NFIB Small Business Economic Trends”, July 2007

…small businesses can also be more vulnerable

to demographic and economic change.

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1. Provide for your employees and executives

2. Protect your business from unexpected circumstances

3. Prepare for business transfer or succession

4. Plan for your personal financial independence

Creating Small Business Protection Strategies

By managing risk in four different areas

How can you increase your chances of business success?

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1. Provide for Employees & Executives

Retirement is the second biggest benefit concern for employees, after health insurance 1

There is a 46% chance that an employee aged 30 will be disabled for 90 days or more; 40% if aged 45 2

1 Transamerica Center for Retirement Studies “The 9th Annual Transamerica Retirement Survey -- workforce survey”, 2007

2 National Underwriter ”Field Guide to Estate, Employee & Business Planning”, 2008

Assessing the Risk:

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Which retirement plan best suits your business?

Simplified Employee Pension plan (SEP)

Defined Benefit Plan (traditional pension)

Savings Incentive Match plan (SIMPLE)

Deferred Profit Sharing plan

401(k)

Key Considerations:

1. Provide for Employees & Executives

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2. Protect Your Business

If your current business partner passes away, their spouse could legally become your new business partner

The loss or departure of a key employee can mean the loss of profit, clients, proprietary knowledge and specialized skills

Assessing the Risk:

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Business continuation programs protect against the loss of an owner, partner or key person

Protection Strategy:

2. Protect Your Business

Goal Protect your

business

against the

loss of a

partner or key

employee

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How can these services protect my business?

Buy-Sell Agreement Key Person Coverage

Business Overhead Expense

Disability Buyout

Employee Stock Ownership Plans (ESOPs)

Key Considerations:

2. Protect Your Business

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3. Transfer Your Business

Only one-third of family owned businesses survive the transition to the second generation. A primary reason for this dismal survival rate lies in poor succession planning.

Source: New York State Society of CPAs “Money Management”, July 10, 2006

Assessing the Risk:

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Written succession plans outline legal, financial and managerial considerations for transferring a business from one generation to the next.

Protection Strategy:

3. Transfer Your Business

GoalSuccessfully

transfer your

business when

you are ready

to move on

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4. Plan for Your Personal Independence

The primary source of capital for most new businesses comes from savings and other personal resources.1

Study shows that 47% of small-business owners are not at all confident that they're saving enough for retirement. And more than half indicate that they plan to retire after age 65 or never.2

1 *www.sba.gov, “Starting Your Business – Finance Start-up”, 2008.

2 Harris Interactive “ShareBuilder Small Business Annual Retirement Trend survey”, 2006.

Assessing the Risk:

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Maintaining separation between business and personal planning can help mitigate risks and is a good practice.

GOAL BUSINESS PERSONAL

Pass on assets Succession Plan Estate Plan

Retire comfortably Business Continuation Plan Retirement Plan

Examples:

Protection Strategy:

4. Plan for Your Personal Independence

Goal: Plan for your

non-business

financial

needs

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How can I plan for each of these needs, regardless of the state of my business?

Asset protection

College planning

Family protection (income replacement)

Retirement savings

Retirement income distribution

Elder care

Key Considerations:

4. Plan for Your Personal Independence

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Additional Benefits to Business Planning

Save time

Improve tax efficiency

Compete effectively

Handle change

Manage growth

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AXA Advisors & Small Businesses

AXA Advisors can offer:

Approximately 6,000 financial professionals across the continental U.S., Hawaii, Puerto Rico and the Virgin Islands

A wide array of small business products and services from hundreds of affiliated and un-affiliated companies

Retirement plans customized for small businesses

Planning coordination with business owners’ other advisors (legal, tax)

Planning services through each business stage — start-up, growth, maturity, transference