Business Owners - Succession and Estate Planning

More than 80% of businesses in the U.S. are private and/or family owned businesses. Businesses owned by members of a single family make up 175 of the Fortune 500 companies. Regardless of whether or not you own a Fortune 500 business or a small family business there are many issues which arise in connection if one of the associated partners or owners dies or becomes incapacitated. Who manages the business? How would your family get your investment capital out of the business? How do you effectively pass your company to the succeeding generation with minimal tax consequences?

The statistics are alarming:

• 70% of family owned businesses do not survive to the second generation
• 85% do not survive to the third generation
• The average family owned business lasts only 24 years
• 3 General Reasons for the failure of businesses passed to succeeding generations:
  • Tax consequences on the transfer of business assets without proper planning:10%
  • Lack of competence and preparedness of family members: 25%
  • Relationship issues including the inability of the family to “get along”: 60%

Most family businesses fail to develop a comprehensive strategic vision which could be embraced by the succeeding generations. To begin business succession planning you must frame personal lifestyle and retirement goals, business visions for the future and estate planning goals and objectives, including but not limited to the following, define expectations (where does the client want to be in 5, 10, 15 years?) and determine the exit strategy for the first generation (death is not a good exit strategy) and succeeding generations. Once those issues are identified then the “team” of advisors (attorney, CPA, financial and insurance advisor) can assess the planning techniques that will most closely align with the client’s goals and objectives.

Five common techniques for business succession planning:

• Buy/Sell Agreements
• Family Limited Partnerships
• S Corp Recapitalizations
• Employee Stock Ownership Plans
• Intentionally Defective Grantor Trusts (sales to family members)

Make your complimentary appointment today!