Family Succession Transfers

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Many owners of family businesses hope to transfer what they have worked so hard to build to their children or other family members. While this seems like the easiest of all transition plans, it is not without challenges. It is estimated that only 35 percent of family businesses survive past the first generation of ownership and only 20 percent survive to the third generation. Like any type of business transition plan, the important part of transferring a family owned business is the planning. Estate and succession planning decisions involve complex questions of law, tax implications and operational business planning. Generally, the process of transitioning a family owned business will involve a team of accountants, lawyers, appraisers and professionals.

The most important thing to know about a business succession plan is that it is a process, not an event. It is also important to make a careful determination as to who should be involved in formulating the plan. Business transitions have the best chance of success with the buy-in of all interested parties. A formal succession plan will take into account the following important issues and challenges, among others:

  • Goals, both before and after the transition
  • Timing of the transition
  • Determination of successor (family member or outside parties)
  • Estate and gift tax implications of the transfer
  • Impact of the plan to employees, investors and other stakeholders

In many cases business owners are focused on running the day to day operations of their business and fail to plan for the eventual transition to successors. In failing to do so, they put at risk what they have worked so hard to build. Without proper planning, owners and successors are often surprised to realize the estate, gift and income tax consequences of a business transition in the event of the death or unplanned transfer of the business. Proper business transition planning provides the liquidity necessary to pay these taxes, should they exist.

The experienced professionals at CGT Solutions have provided tax planning and mergers and acquisition assistance to many business owners. For a family owned business, our services include the development and implementation of an appropriate succession plan together with the assembly and management of a professional team to implement the plan. If you are interested developing a business transition plan for a family owned business, contact us today to schedule a free, no obligation consultation.

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