I cannot believe how many business owners don't know this. Perhaps it's a function of being a merger and acquisitions advisor in the conservative Midwest, but this is often news to our clients. It's called a dividend recap and it's a relatively low-cost way to get some of your chips off the table if you own a business
Here's how this works. You own a successful business and you have a solid banking relationship. You use your line of credit to fund accounts receivables and inventory, and a term loan for your capital expenditures. You have probably heard that by having all your wealth in the business, you are terribly un-diversified. You can sell your business (we can help you with that too), but if you're not ready for that, you can also put a reasonable amount of debt on your business and take a dividend.
Check out this video and more tips on our YouTube channel.
This doesn't work with all businesses, but it works with many of them - especially if you have lots of assets, consistent cash flow, and a long and profitable operating history. Remember, debt is the lowest cost way to get money out of the business. If you need to take some chips off the table, it's worth considering a dividend recapitalization because relative to selling equity in the business, it's a much less expensive form of capital.