In a family business, one or more family members have a significant ownership interest commitment to the success of the business. Often, such businesses are the primary source of family wealth and, therefore, an important factor in estate planning.
A number of issues arise with the operation of the family business, including management by family members and others and conflicts between the interest of the business and the interest of particular family members. The owner who built the business might want to sell it to maximize his or her return. Alternatively, the owner might want to retain the business because it represents his or her career and opportunity for the children.
Key issues that need to addressed on an ongoing basis include:
- Structure. What is the legal structure of the business? What are the tax considerations? Who is in control?
- Succession. If the goal is to transfer to the business to the next generation, how is this best done? An interest in a family business might be the single largest component of an estate plan. How does the owner transfer the business to the next generation in the most tax efficient and profitable way?
- Disputes. During the course of operation, disputes with third parties can arise. If it becomes necessary to involve an attorney, what are the best alternatives – negotiation, settlement, litigation – to address particular circumstances?
Often family business owners can benefit from involving more than one professional advisor, each having the particular skill set needed by the family. Some of the skill sets that might be needed include communication, conflict resolution, family systems, finance, legal, accounting, insurance, investing, leadership development, management development, and strategic planning.
Succession planning identifies and develops people with the potential to fill key leadership positions in the company. Creating the right business succession plan can minimize income tax issues and prevent estate tax problems down the road. It will enable the owner to determine what will happen to the business when the owner is no longer able to maintain it. What is the best approach for your company? The Stephen Mooney Law Offices, PC can help. Contact us!