A Few Options To Keep In Mind When Estate Planning For A Family Business

The Baby Boomer generation proved to be one most entrepreneurial in history and, as a result, will face unprecedented challanges when it comes passing that wealth down to the next generation. However, there are options when it comes to setting a plan for business succession or sale:

For a family business, a transition can occur between the two generations by selling or gifting the shares in the business. However, for families with multiple members involved in the business, be careful to make sure that everyone is on board with the transition plans to forestall challenges from those that feel left out.

An employee stock ownership plan can be used to transition ownership to the employees of the company while offering tax breaks for the owner. These are growing in popularity due to a desire to reward loyal workers but must be carefully planned due to the strict legal requirements involved.

In some cases, a sale is not in the cards for a business so winding down is the only option. However, each state has laws that carefully set out the process to shut down a particular business entity and if not followed may create personal liability for debts and lawsuits that would otherwise have been attributable to the business.

See Brent Beshore, Why Small Businesses Are Feeling An Economic Crunch, Forbes, October 12, 2015.

Special thanks to Jim Hilhouse for bringing this article to my attention.