Dealer Tips

Top Tips for Dealers

1. Separate Business Entities

Are you taking full advantage of setting up separate businesses as separate business entities to keep liabilities contained and to provide income or transfer future appreciation to different family members?

2. Wealth Preservation and Succession Planning

Wealth preservation planning is too late when there is already a buyer and a deal in place. There may be opportunities to use “intentionally defective grantor trusts (IDGTs)” and “grantor retained annuity trusts (GRATs)” to transfer the value of a dealership during your lifetime for estate planning and succession planning purposes. Life insurance, placed in trust, may be used to buy out the shares of inactive family members. Having assets in trusts may provide creditor protection and insulate the assets from disruptions caused by a possible divorce scenario. Of course, early communication with the manufacturer and floor plan lender and review of restrictions on ownership transfers is essential.

3. Financing Issues

Do you have a plan for dealing with a bad audit? If there is any possibility that sales have been made out of trust, contacting legal counsel to develop a strategy for informing your floor plan lender about the situation is advisable and certainly preferable to misleading the lender about where an out of trust vehicle is located.

4. Alternative Financing

Has your lender offered financing alternatives for real estate or construction, such as using an SBA 504 loan, which offers a lower equity injection, fixed interest rates, and longer-term financing? On the other hand, is it advisable to make expensive manufacturer-imposed upgrades to your showroom on land leased from a third party without reevaluating your lease terms?

5. Employer Liability

Are you taking appropriate steps to prevent and correct unlawful harassment, including providing anti-harassment training, establishing an effective complaint or grievance process, and taking immediate and appropriate action when an employee complains?

6. Warranties

Do you offer “warranties” or “guaranties” in addition to those provided by the manufacturer? A legal review of these documents may indicate that you are incurring unintended liability due to the way you present the promises you are making.

7. Latest Wire Fraud Scams

Are you and your employees aware of the current fraud schemes to divert wire transfers? And are you taking steps to protect the dealership?

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