Business Planning

You've worked hard building your business, but have you thought about what will happen when you are no longer there running the show? According to one study (Small Business Review, Summer 2001), only 30% of all family-owned businesses survive to the next generation; only 12% make it to the third generation; and a meager 3% are functioning into the 4th generation and beyond. Why? Most business owners simply do not plan an exit. They do not do proper estate planning, which often results in unnecessary estate taxes that drain the life out of their businesses. And they do not plan for a successful transition to the next generation. Who could take over your business? You may have more choices than you think. Family members are often a logical choice. Most business owners...

How to Transfer Your Business (and Other Assets) to Your Children Without Losing Control A family limited partnership will let you remove your business, and any future appreciation on it, from your estate now, and still keep some control. It is especially useful when the business might otherwise have to be liquidated to pay estate taxes. Stocks, real estate or insurance can also be used instead of a business. Here's how it works. When you set up a family limited partnership, you transfer the assets into the partnership in exchange for partnership shares. You keep the general partner shares and, over time, you can gift limited partnership shares to your children, removing the value of the gifted partnership interests from your estate. Though you have a fiduciary obliga...

“Those who labour in the earth are the chosen people of God, if ever he had a chosen people, whose breasts he has made his peculiar deposit for substantial and genuine virtue.”  - Thomas Jefferson The farmer as virtuous is well-established in our national conscious and reverence for the family farm sets planning for it apart from other types of family owned businesses. Even children who do not plan to actively participate in farming have a deep emotional attachment to the farm. According to the USDA, approximately 96 percent of the 2.2 million farms are classified as “family farms.” The average age of a farm operator is 57 and the fastest growing segment is tho...

Have you been looking forward to the day you can retire, perhaps turn your business over to a son or daughter, or sell it? Even if you are not planning to stop working, you need to plan for the day you cannot run your business due to unforeseen illness or death. Most business owners do not take the time to plan for how they will leave their business. They are busy running the company, or they don't know where to start. But if you continue to own a business until you die, it will be included in your estate and could be subject to substantial estate taxes. Your family could be forced to sell the business or its assets at "fire sale" prices. Then you will have worked hard all these years so that the vultures and Uncle Sam, not your family, will reap the benefits. Plan...

Many business owners devote much time and energy “working in” their business to improve business operations and profitability; however, they often neglect to “work on” their business by not addressing certain asset protection issues. Business owners, particularly those owning their business in corporate form, should consider the following: 1) how to own C corporation or S corporation stock to minimize exposure to creditors, an “outside” asset protection issue; and, 2) whether to implement several basic business agreements designed to protect and even enhance business value from the “inside” of the corporation. Stock...

Now that you have formed an LLC for your client, the LLC as an independent and separate entity from his other affairs. Among other things, your client’s goals are to:       • Protect his assets from future creditors;     • Protect his other assets from any claims made against the LLC;     • Have centralized management for future generations;     • Protect the assets against failed marriages;     • Facilitate transfers among family members;     • Obtain discounts for estate and gift tax purposes, or for purposes of a sale to family       members or trusts for their benefit.   The IRS often attacks these discounts in LLC plannin...

Do you represent clients who are owners or man­agers of privately held companies? Are they looking for exit strategies that will:       ·     Reduce or eliminate the company’s income taxes;     ·     Reduce risk by diversifying an owner’s investments; and,     ·     Increase the wealth of the company’s managers and • employees? Advisors of privately held companies who answer yes to these questions are considering Employee Stock Ownership Plans (ESOPs).   What is an ESOP? An ESOP is a qualified retirement plan with special exemp­tions allowing the plan to use debt to acquire “employer securities” which consists of common and convertible preferred s...