Your family-owned business is more than just a job; it is a passion, a means of providing for your family, for your employees, and for yourself. As such, many of my clients are reluctant to give up control of their family businesses.
The good news is that there are several strategies available to faciliate the transfer of interests in family business. Some of these strategies can be quite complex, but a simple "buy-sell" arrangement may be sufficient.
This was the subject of a recent article in Forbes titled “Exiting The Family Business: Tax Tips And Techniques,” which included some important tax and planning pointers. At its most basic level, the simple efficiency of a buy-sell arrangement is easy to understand and appreciate. Commonly, the business owner is going to need retirement income after they exit the business. Selling the business within the family allows the next generation to assume control of the business in a way that guarantees the financial well-being of the retiring owner.
This type of transfer can be accomplished with an outright sale, or with a sale made over time in installments. The business owner can even gift some of their interests away and sell other interests. Whether gifting or selling interests in a family business, having an accurate valuation of the business is critical. If the valuation is too low, then the sale might be considered a gift - and the tax implications of the deemed gift could be extremely negative.
When it comes to selling or gifting interests in any business, you should consult with qualified counsel. For more information about business succession planning in Miami, Florida, please visit my estate planning Web site.
