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. More…

Family Limited Partnerships and Family LLCs: Sheltering Growth From Estate and Gift Taxes

Family Limited Partnerships and Family LLCs:
Sheltering Growth From Estate and Gift Taxes

by John V. Ivsan
Shumamker, Loop & Kenkdrick

Introduction

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…