One of the biggest threats to the successful continuation and succession of family businesses are the constantly changing tax laws. Utilizing an experienced Estate Planning Attorney, Tax Attorney and Business Attorney, along with a solid Business Accounting Firm, to ensure you not only maximize present profits while minimizing your tax financial obligation, but also successfully plan to pass your estate and business onto heirs in the most tax preferenced way. Here are some Estate Planning considerations to keep in mind while planning for business continuation and succession.
Maintaining Liquidity
Major concerns typically are the perpetuation of the business and maintaining liquidity. Without sufficient cash to pay estate taxes, heirs have little choice but to drain cash from the business when it most needs it or worse, be forced to sell it or sell many of its prized assets.
Proper Estate Planning will…
- Significantly reduce the necessary need for heirs and beneficiaries to have to remove funds from the business.
- Maintain beneficiaries’ interest stakes by keeping funds in the Company.
- Provide a fluent transition when developed in conjunction with the Management/ Leadership Strategic & Succession Plan and the Company’s Operating Authority Plan.
Sell the Controlling Stake in Advance
Selling the patriarch’s / matriarch’s stake in the business, in advance of any Succession Plan implementation (whether a planned or sudden departure) to family members can be the best estate planning a family business can employ, while giving the business leader control of the Company and Effective Business Plans until the agreed upon relinquishment.
Resource: For more information on business planning, please see my article on How to Write a Loan Package.
Tools to Minimize Estate Tax Liability
There are a host of structural tools which can be used to minimize estate tax liability, that should be fully explored with your Financial Advisory Team, such as:
- Gifting
- Stock Sales
- Trusts
- Limited Liability Corporations
- Family Limited Partnerships
- Share holder Buy/ Sell Agreements
Business Valuation
Establishing a valuation of the business which is in compliance with IRS regulations is critically important. Overvaluing, as well as, undervaluing a business for tax purposes can both be highly expensive mistakes. This is why having an excellent Tax & Financial Team of Advisors in place is absolutely essential.
Consult a Tax Attorney and CPA
As Turnaround Consultant who have seen what makes a company successful, I find many companies could use more legal and accounting help. Experienced tax attorneys and CPAs specializing in family businesses are an absolute must. Seek their advice and opinion. This article is not meant as tax or legal advice. Be sure to consult a licensed professional.
About The Article Writer
Frank Goley has a diverse and wide-ranging experience base as a business consultant, business turnaround consultant, business plan expert, business plan writer, business coach, small business consultant, business planner, marketing consultant, online marketing consultant, seo consultant, and Business Plan Consultant for ABC Business Consulting. Frank is considered an expert in writing, developing and implementing business plans, business turnaround plans, funding business plans, Marketing Plans, strategic plans and web marketing plans. Frank offers comprehensive business consulting, business coaching, business turnaround consulting, along with web seo, web development and web marketing consulting, to small and medium size companies. Frank is the author of a business plan book, The Comprehensive Business Plan Workbook – A Step by Step Guide to Effective Business Planning, and he has over 130 published articles and e-books on business success strategies. He also writes the Business Success Strategies Blog.
