Planit:Malaysian Sale of a Business Case Study

From Planipedia

This case study is specific to financial planning in Malaysia, so has fixed values rather than indices by country. For a similar case study applicable to other case studies, please see Planit:Canadian Sale of a Business Case Study, Planit:UK Sale of a Business Case Study, or Planit:Singapore Sale of a Business Case Study.

Example Problem One:

Add a Sale of Business revenue to the Pensions and Other Revenues screen, to complete the affects of the business on the financial position. You should also incorporate a business into their asset holdings, and as the basis for fluctuating income.

So Maznita owns a small business, which she has owned for over ten years and is planning on selling when she retires. It is worth approximately RM 250,000, and she feels that this value will grow with inflation until she sells it.

Solution Using Detailed Pension Information:

1. Click on the Add button above the current revenue entries
2. Enter an appropriate description in the Description field.
3. In the drop-down menu beside Owner change the setting to Spouse
4. The $250,000 value of the business can be entered in the Amount per Year field
5. Both the From Year and To Year fields should be set to Maznita’s target retirement year, since the sale of the business is a one-time revenue
6. The Index Rate can be left at the client’s default inflation rate, or another value that reflects how the business will increase in value over time
7. Set the Percent Taxable to 5%, since this is the set amount based on the business being owned over 5 years.

Note: For Islamic client paying zakat, the Percent Taxable should be set 2.5% higher than the % Taxable indicated above; in this case to 7.5%. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the revenue will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year.

1. The Amount on Death can be set to 100%, since the business will likely go to her husband.
2. The Amount on Disability would be 100%, since disability would not affect it.
3. The drop-down menu beside Model As should be set to Defer with Retirement since the Maznita will sell the business when she retires.
4. Click Save to return back to the summary Pensions screen