Patrick Ungashick’s client was looking for a way out.

The founder of a $50 million wholesale delivery company, the client was 58 and anticipating a day when he’d no longer be tied to the business. Trouble was, practically his entire net worth was tied up in the company, making it imperative to get as much as possible from any sale to fund retirement for him and his wife.

Like many entrepreneurs, he was emotionally tied to his business and felt a strong sense of loyalty to his employees. The workers felt similarly, to the point that they were willing to pay considerably more for the company than an outside buyer would.

But there was one problem: ???None of them had enough money to buy the whole business,??? Ungashick says. ???And the client didn’t want to break it up into smaller pieces ??? it was really important to him, both financially and emotionally, that the company remain intact.???

Ungashick, president of Atlanta-based White Horse Advisors LLC, specializes in helping entrepreneurs devise effective exit strategies that meet clients??? common goal of personal financial freedom.

In this case, he addressed two essential issues: the business owner’s need for dedicated retirement assets not related to the sale of the business, and setting up a structure by which willing employees eventually could buy the company.

Ungashick dealt with the first issue by helping the owner and his wife devote considerable assets to their retirement plan via profit-sharing contributions. This had the added benefit of reducing the business’ taxable income.

The second challenge was more complex. Thanks to the client’s relatively early recognition that he needed outside assistance, Ungashick was able to develop a plan that allowed him to maintain control of the business for now, while moving toward an eventual sale to a small group of trusted employees.

Here’s how it worked: Ungashick helped create a limited liability company (LLC) outside of the operating business. The client is managing partner of the LLC, but owns just 1% of it. The employee-buyers own the other 99%, but have little control over its operations.

Over time, the client put business assets in the LLC. For example, when the company needed new trucks, the LLC bought them and then leased them back to the company for an amount greater than the LLC???s debt payments on the trucks. The extra payments accumulated as profits in the LLC.

The structure has some advantages. Employees can use their ownership stake in the LLC ??? its history and cash flow ??? as collateral for a bank loan when it???s time to complete the sale. This strategy also prevents the double taxation that would occur if the employees were to use the business??? after-tax profits to purchase the company from its owner, who would pay taxes on that income as well.

What’s more, employees are on the hook for any taxes on the LLC. Rather than paying the taxes from the LLC’s profits, each employee declares his or her portion of the operating income as phantom income on his or her own taxes. The tax obligation weeds out employees who aren???t sufficiently motivated to invest in the business: Of the six employees this client had in mind, only four agreed to participate in the partnership. ???The employees have real economic skin in the game,??? says Ungashick.

Today, five years after the partnership was created, it holds what Ungashick describes as ???significant??? value. Says Ungashick, ???My client and his employees are very happy with the partnership. And he???s still planning to exit the business on schedule, at age 65.???

-By Michaela Cavallaro, For Dow Jones Newswires