All You Need Is Love
(And A Business Assets
by Ronald P. Weiss and Ellen M. Randle
To a young couple engaged, their marriage will be a relationship of love and trust.With age and experience we learn that marriage is also very much an economic arrangement, involving the immediate, and often the extended families of the couple.We also learn that many marriages are not stable and end in divorce, and that any marriage can end with an unexpected early death.As much as you may like your child’s fiance, you are probably a little nervous about what may happen if your child owns an interest in your business and your child’s marriage doesn’t work out or your child dies.
As a business owner, it is natural for you to be concerned about who else owns an interest inyour company.Whether your children own an interest in your business, or you plan to give or leave your business to your children, you certainly do not want a hostile stranger as an owner, and you may not want anyone other than immediate family to be an owner.
If you mention your concerns to your lawyer, your lawyer may suggest that the couple enter into an antenuptial agreement. Mention an antenuptial agreement to your child, and your child may suggest that you are asking them to sign an antenuptial agreement. More…
Family Limited Partnerships and Family LLCs:
Sheltering Growth From Estate and Gift Taxes
by John V. Ivsan
Shumamker, Loop & Kenkdrick
A problem inherent in most family businesses involves the issues of succession and taxation. As a family business continues to grow, the business becomes an increasingly valuable asset in the hands of the elder family members. If the business remains in a parent’s estate, upon death there may be significant estate taxes, as well as liquidity problems involved with paying those taxes. The parent’s estate may be compelled to sell valuable assets to pay for estate taxes, jeopardizing the family business and leaving heirs with a diminished estate.
Parents are often reluctant to remove a family business from their estates.Typically, a parent does not want to part with management control over the family business, risking the fortunes of a growing enterprise with children who may be less experienced at the business.Additionally, many traditional forms of transferring ownership of the family business from parents to children are subject to high levels of gift tax.
The explosion in popularity of family limited partnerships (“FLPs”) in the past few years as a solution to these problems can be attributed to the versatility that a FLP offers to a family business.By contributing their interests in a family business to a FLP, parents may transfer future ownership and control of the business to their children at a substantially reduced transfer tax cost while at the same time permitting the parents to retain control over the business. More…