WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby Selling Out without Selling Out Sooner or later, everyone wants to retire. In addition to ensuring there will be enough money to retire, drilling business owners, shareholders, and partners should think about what will happen to the business when they are no longer in control. Many who have invested a great deal of time, money, and energy into their drilling operations want to see the business continue and flourish after their departure. For them, strategies for selling out without actually selling outright allows the drilling business to remain in the hands of the family or key employees while the principal begins easing out, relinquishing control as desired. One strategy - the family limited partnership (FLP) - has, over the years, proven itself an extremely valuable tool for both business and estate planning. After all, what other tool can ease or even eliminate the tax bite often associated with transferring the drilling business - or its income - to family members, all the while keeping the owner’s current tax bills to a minimum? Typically, an FLP is formed by the older generation, usually the parents, who contribute assets to the partnership in return for both general partnership units and limited partnership units. The parents can then embark on a plan of giving unlimited partnership units to their children and grandchildren while retaining the general partnership units which actually control the partnership. Thus, the parents might retain control of the business; draw a salary or wages from it, all the while sharing the profits with other family members who are taxed on those profits at a tax rate which is usually lower than that of the parents/owners. A manufacturer, distributor, supplier, or drilling contractor selling a business to its employees using an Employee Stock Ownership Plan (ESOP) allows the sale proceeds to be rolled over on a tax-deferred basis. In addition to being an excellent exit strategy with significant tax savings for the owners, shareholders, and members of drilling businesses, ESOPs are great for motivating and rewarding employees - and for taking advantage of incentives to borrow money for acquiring new assets in pretax dollars. Obviously, if the goal is to move ownership of the business to future genera- tions, the best time is in the early stages of the operation when values are low. Naturally, the opinion and guidance of a qualified advisor should be sought - and followed. After all, the taxes saved may be yours or your heirs. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com Hydraulic-Pneumatic tools in stock. Sizes 1” to 20”. SALE Mention this ad and receive sales discount. Model 113HD All Hydraulic Sizes 1"-13" 2547 W Success Way Emmett, ID 83617 (208) 365-3492 • Fax: (208) 365-3792 rauchmfg.com rauchmfg@frontiernet.net 34 OCTOBER 2017 WorldWide Drilling Resource ® Frequently-Used Geological Terms Part 65 Glossary Adapted from the Dictionary of Geological Terms P Phosphorite - A sedimentary rock with a high enough content of phosphate minerals to be of economic interest. Most com- monly, it is a bedded primary or reworked secondary marine rock composed of microcrystalline carbonate fluorapatite in the form of laminae, pellets, oölites, nodules, and skeletal, shell, and bone fragments. Phreatic Explosion - A volcanic eruption or explosion of steam, mud, or other mate- rial which is not incandescent. It is caused by the heating and consequent expansion of groundwater due to an un- derlying igneous heat source. Phreatic Water - A term which originally was applied only to water occurring in the upper part of the zone of satu- ration under water table conditions, but has come to be applied to all water in the zone of saturation. Phyllite - A metamorphosed rock, intermediate in grade between slate and mica schist. Minute crystals of sericite and chlorite impart a silky sheen to the cleavage sur- faces, which are commonly wrinkled. Look for more terms next month! Folded, laminated phyllite from the Loudoun Formation, near Furnace Mountain, Loudoun County, Virginia. Photo courtesy of USGS.gov.