America’s Wealthiest People: Who are they? Reviewed by Momizat on . Who Are America’s Wealthiest People? Small- and medium-sized businesses are the engines that drive the American economy. An IRS study of everyone who died with Who Are America’s Wealthiest People? Small- and medium-sized businesses are the engines that drive the American economy. An IRS study of everyone who died with Rating:
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America’s Wealthiest People: Who are they?

Who Are America’s Wealthiest People?

Small- and medium-sized businesses are the engines that drive the American economy. An IRS study of everyone who died with a net worth of at least $600,000 (and thus was required to file an estate tax return) showed America’s wealthiest citizens all have one thing in common: they all held significant blocks of stock in closely held private companies.  In a nutshell, the surest way to get rich in America is to own a business.

Want to know the actual numbers?   According to  IRS reports, over six million businesses file tax returns each year: 80 percent are companies, 20 percent are partnerships. (Don’t forget there are another 20 million unincorporated businesses!) Fewer than 11,000 of these companies are found on Wall Street; 99.9percent of American businesses are privately owned and their stocks are not traded on any stock exchange.

An IRS study of everyone who died with a net worth of at least $600,000 (and thus required to file an estate tax return) showed America’s wealthiest citizens all have one thing in common:they all held significant blocks of stock in closely held private companies.  In a nutshell, the surest way to get rich in America is to own a business.

According to the IRS reports over six million businesses file tax returns each year: 80 percent are companies, 20 percent are partnerships. (Don’t forget there are another 20 million unincorporated businesses!) Fewer than 11,000 of these companies are found on Wall Street; 99.9 percent of American businesses are privately owned and their stocks are not traded on any stock exchange.

Small- and medium-sized businesses are the engines that drive the American economy. For example, the U.S. Small Business Administration reports privatelyowned companies are responsible for 58 percent of all private-sector jobs, 43 percent of domestic sales, and 51percent of our private gross domestic product.

These 6.6 million businesses are not all alike. The U.S. Department of Labor reports 55 percent of them employ fewer than five people, and another 20 percent employ five to nine. That means 75 percent employ fewer than 10 people. That also means 25 percent employ 10 or more. Twenty-five percent of 6.6 million businesses is 1.6 million companies.

The Exit Planning Institute compiles data on the value of private held companies.  There research shows that companies with 10 or more employees are often worth $1 million or more. Another rule-of-thumb is that if a business is doing $2 million or more in sales, chances are it is worth at least $1 million. There are always exceptions to the rule of course.

If you read the best-seller The Millionaire Next Door, you know the business need not be glamorous to make its owner a lot of money. For example, guess what occupation is most likely to make somebody a millionaire today?

Doctor? Lawyer? Real estate?

Guess again. Statistically speaking, according to The Millionaire Next Door, the occupation most likely to make somebody a millionaire is to own a dry cleaner!

The nation seems to understand the benefits of owning a business.  What owners are still working on, however, is being thorough and thoughtful about an exit plan. 

According to a recent survey, only two in 10 business owners have an exit plan.  The Exit Planning Institute is devoted to helping these business owners develop the best plan for cashing out or passing on their own business.

Richard Jackim, JD, MBA, CEPA is an experienced attorney and investment banker and a member of the Board of Governors of Exit Planning Institute). Reach him as Rjackim@exit-planning-institute.org 

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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