Happiness is Stock Liquidity

 

Happiness is Stock Liquidity

It’s One of the Keys to Keeping the Peace

with Inactive Shareholders in Later-Generation Companies.
Here’s how you can Track Stock Value on a Continuing Basis and set up a Stock Redemption Program

by François M. de Visscher

The lack of liquidity options is the most frequently cited source of unhappiness among passive family shareholders. The demands of these shareholders frequently escalate in later generations at just about the time when larger family businesses have opportunities to expand or a need to diversify and require infusions of capital. At precisely the time when third- and fourth-generation shareholders are coalescing as a force to be reckoned with, management is resisting their demands for liquidity, setting the stage for family conflict. Under the emotional strain of being badgered for liquidity and constantly second-guessed, the managing shareholders often throw in the towel and sell the company, more out of frustration than rational choice. The collision of interests often damages family relationships irreparably. More…

Family Limited Partnerships

Family Limited Partnerships UMass

Related Matters Newsletter
Summer 1995

by Ronald P. Weiss, Esq.
Bulkley, Richardson and Gelinas
Springfield, Massachusetts

You pay a fortune in taxes. You pay income taxes on what you earn and on what your investments earn. You pay taxes on what your employees earn. You even pay taxes on inflation. And the income tax rules are so complex, so you have to spend days and incur substantial fees just to pay your income taxes. Then, when you die, the government plans on taking a substantial portion of the wealth you have left after all the income taxes. If you are in the highest income and estate tax brackets, this means that for every dollar you earn that is taxed at ordinary income tax rates, your children will inherit only 27 cents.

The laws of our country are designed to make it difficult for you to transmit a substantial estate relatively intact to your children. In response, estate planners have created a number of techniques to help you leave as much as you can to the next generation. Unfortunately, the most common techniques, outright gifts and placing assets into irrevocable trusts, will most likely put assets outside of your control. This may make you uncomfortable if income producing assets, especially your family business, are involved. These methods may also give rise to estate and gift taxes based on the full value of what has been transferred. More…