Selling Your Company With Minimal Capital Gains

Selling Your Company With Minimal Capital GainsUMass

Related Matters Newsletter
Winter 1996

by Kevin M. Flatley, Esq.
Private Bank at Bank of Boston

Some years ago, two brothers came to my office intent upon selling their business. They each were to receive $1 million and were prepared to pay what today would be a 28 percent federal capital gains tax including better than a ten percent capital gains tax to the Commonwealth of Massachusetts. This meant a $300,000 tax payment from each of them.

Instead of paying this tax, they simply sold all their corporate assets and the buyer also bought their corporate name. This left them with a “personal holding company,” the remains of their old company, but with a new name. The personal holding company held nothing but cash.

Our first reaction is that this is no bargain for these individuals; they will be taxed twice on their income, once at the corporate level and a second time as the income is paid to them as dividends. Further, we assume that eventually someone is going to pay the capital gains tax. Our two brothers, however, never paid taxes on their income at the corporate level; and when they died some years ago, the death resulted in the forgiveness of all capital gains. The reason is that the brothers took advantage of two major benefits of the tax law. More…

Conflict in the Family Business: Managing Conflict Through Legal Agreements

Conflict in the Family Business:
Managing Conflict Through Legal Agreements

Newsletter
by Robert B. Curran
Whiteford, Taylor & Preston

Disagreements and conflict among owners or managers of closely-held firms can have devastating consequences. A company’s inability to anticipate and resolve internal strife could threaten the very existence of the firm.

In many cases, such conflict can be prevented or resolved through carefully prepared legal agreements.These can direct parties on issues such as corporate governance, establishing and modifying compensation arrangements, circumstances requiring the withdrawal of a participant, and setting the price and terms for purchasing a department participant’s interest. More…