Life Disposition of the Family Business

Life Disposition
of the Family Business
Succeeding Generations
Fall, 1996

by Barbara Gill, CLU, ChFC, CFBS
& Dale J. Seymour, CLU, ChFC, CFBS
Seymour and Associates

Retiring from the family business?What does one do?Sell to other family members?Sell to an outsider?Perhaps retain the family business and gift portions annually to other family members.What about an installment sale or private annuity?Is an ESOP an alternative?What about charitable remainder trust?How does one structure the deal so that the buyer can afford to buy and the seller can afford to retire?Fortunately, there are many creative planning opportunities available to assist the family business owner who desire to create an exit strategy.Planning in advance becomes the key.

Without question, there are many choices to be made regarding business transfers during a lifetime.One option the family business owner always struggles with is whether or not to sell the family business to family members or an outside third party.In the event of structuring a sale with family members, several particular questions should be addressed.

First, are all of the family members interested in buying a proportionate share of the business?Secondly, should all the family members be involved in the business?If not, how do we treat those who don’t buy a proportionate interest?Should they receive a minority position in the business anyway?Of course, one could alternate the bequests for non-involved family members if sufficient assets are available. More…

The Key to Long-Term Shareholder Value, Part I

The Key to Long-Term Shareholder Value, Part IBaylor

Legacies Newsletter
by Donald J. Jonovic, Ph.D.

Owners of closely held companies, by experience, inclination, necessity, and, often, personality, tend to focus on the short term. Most available waking hours are absorbed by immediate problems, sudden opportunities, annual profits and cash flows. Fortunately, a successful business can, in fact, be built this way. It happens every day.

Unfortunately, this focus on immediate challenges and rewards is definitely not the way to build the shareholder value of that successful business for the long-term.

Consider how this outlook affects transition. Few would doubt that a smooth ownership and management transition in a family firm can enhance the value of that firm to shareholders and potential buyers. Even so, in companies with a short-term focus, transition (when it’s thought about at all) is seen as an “event” in some distant future: “We’ll get to it when the problem arises.” This is wrong. Companies don’t suddenly decide to have a transition any more than a woman suddenly decides to give birth. Transition is a process. It is a way of going about things. More…