Inadequate Estate/Financial Planning
Blamed for Family Business Failures
Editor’s Note:The following data, reprinted by permission from Richard Dino, Ph.D., Director of the University of Connecticut Family Business Program, and based on a study by Karen File, an Associate Professor at the University and Russ Prince of Prince & Associates, clearly points up the need for proper estate planning and periodic reviews to protect the firm and family.
Inadequate estate planning and failure to properly prepare and provide for the transition to the next generation, coupled with lack of funds to pay the estate taxes, were among the three leading causes for the failure of nearly 800 family-owned businesses in recent years.Conflicts with family members not actively involved in the business, was a close fourth. 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. More…