Making Sure Your Family Business Lives On
Not all family businesses are traditional small businesses. Family businesses tend not to outlive their founders. At any given moment, 40 percent of family businesses are in the process of transferring their ownership. Unfortunately, two-thirds of all initial transfers fail. Of the one-third that survives an initial transfer, only one-half will survive a second transfer. Many family business transfers fail due to people, taxes and cash. Panitz & Kossoff, LLP, can help ensure that it goes right.
Determine The Appropriate Leaders
The family element in every family business can mean the difference between its success or failure during the transfer process. The retirement, disability or death of the business owner are all common events that can trigger a business transfer. Tough questions must be asked and answered. Otherwise, a business that took decades to build can be destroyed overnight.
The team at Panitz & Kossoff, LLP, will create a business succession plan which incorporates the family element, mitigates federal estate tax issues, and coordinates financial and estate plans in order to fund your objectives. An appropriately funded estate plan can meet all of your people-planning objectives and provide liquidity for estate taxes (and business debts).
The Business Buy-Sell Agreement (BSA)
A BSA is a lifetime contract providing for the transfer of a business interest upon the occurrence of one or more triggering events as defined in the contract itself. For example, common triggering events include the retirement, disability or death of the business owner. An interest in any form of business entity can be transferred under a BSA, whether the business is organized as a corporation, a partnership or a limited liability company.
Additionally, a BSA is effective whether the business has one owner or multiple owners. As a contract, a BSA is binding on third parties such as the estate representatives and heirs of the business owner. This feature can be invaluable when the business owner wants to ensure a smooth transition of complete control and ownership to the party that will keep the business going. Subject to certain family attribution rules under Internal Revenue Code § 318, a BSA can help establish a value for the business that is binding on the IRS for federal estate tax purposes as provided under Internal Revenue Code § 2703.
Call Today To Get Started
Our firm will advise you concerning the type of BSA which will work best for the client’s specific circumstances and the various options for funding the purchase obligation under the BSA. Call 805-918-1202 or contact us online to schedule a consultation. We serve clients in Ventura County and throughout Southern California.