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Newsletter - Winter 2007
Transitioning a Family Business
Michele Lipson, Partner, Tax & Business Services |
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Preparing a business owner for the inevitable transfer of ownership and management of a family business is not easy. Less than 50 percent of all family businesses survive the second generation, so having a comprehensive plan can sometimes save the family and the business. There are critical steps to make this a successful process:
- Identifying the goals of the owner(s)and the family
- Setting up a governance structure/family council
- Establishing family meetings
- Creating a competent team of advisors
- Creating a comprehensive succession plan
Maintaining the financial security of the owner while deciding on a successor and how the ownership of the business will be transitioned can be difficult. Here are some strategies to consider:
- Gifting strategies
- Use of grantor retained annuity trust (GRAT)
- Buy-sell agreements
- Installment sale
- Sale of business
- Private annuity
- Life insurance considerations
Having a comprehensive plan with open communication is the key to a successful transition of a family business. There are many benefits to early planning, which allow the time to properly guide family members in their new roles and may avoid later power struggles and conflict among family members. In addition, many family businesses are able to reduce the transfer tax and preserve their business.
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