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Family-owned businesses face distinctive challenges when it comes to succession planning. For example, it\u2019s important to address the distinction between ownership succession and management succession.<\/p>\n
When a nonfamily business is sold to a third party, ownership and management succession typically happen simultaneously. However, in the context of a family business, there may be reasons to separate the\u00a0two.<\/p>\n
Retaining control<\/strong><\/p>\n From an estate planning perspective, transferring ownership of assets to the younger generation as early as possible allows you to remove future appreciation from your estate, thereby minimizing estate taxes. Proactive estate planning may be especially relevant today, given changes to the federal estate and gift tax regime under the Tax Cuts and Jobs\u00a0Act.<\/p>\n For 2023, the unified federal estate and gift tax exemption will be $12.92\u00a0million, or effectively $25.84\u00a0million for married couples. That\u2019s generous by historical standards. In 2026, the exemption is set to fall to about $6\u00a0million, or $12\u00a0million for married couples, after inflation adjustments \u2014 unless Congress acts to change the\u00a0law.<\/p>\n However, when it comes to transferring ownership of a family business, older generations may not be ready to hand over the reins \u2014 or they may feel that their children aren\u2019t yet ready to take over. Another reason to separate ownership and management succession is to deal with family members who aren\u2019t involved in the company. Providing heirs outside the business with equity interests that don\u2019t confer control may be an effective way to share the\u00a0wealth.<\/p>\n Possible solutions<\/strong><\/p>\n Several tools may allow you to transfer family business interests without immediately giving up control, including:<\/p>\n Owners of smaller family businesses may perceive ESOPs as a complex tool, reserved primarily for large public companies. However, an ESOP can be an effective way to transfer stock to family members who work in the company and other employees, while allowing the owners to cash out some of their equity in the business.<\/p>\n Owners can use this newfound liquidity to fund their retirements, diversify their portfolios or provide for family members who aren\u2019t involved in the business. If an ESOP is structured properly, an owner can maintain control over the business for an extended period even if the ESOP acquires a majority of the company\u2019s stock.<\/p>\n Conflicting needs<\/strong><\/p>\n When it comes to succession planning, older and younger generations of a family business may have conflicting objectives and financial needs. If any of the strategies mentioned here interest you, or you\u2019d like to discuss other aspects of succession planning, please contact\u00a0us.<\/p>\n \u00a9 2022<\/em><\/p>\n <\/body> Family-owned businesses face distinctive challenges when it comes to succession planning. For example, it\u2019s important to address the distinction between ownership succession and management succession. When a nonfamily business is sold to a third party, ownership and management succession typically happen simultaneously. However, in the context of a family business, there may be reasons to […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,14,10],"tags":[8,11,12],"class_list":["post-16433","post","type-post","status-publish","format-standard","hentry","category-articles","category-business","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16433","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16433"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16433\/revisions"}],"predecessor-version":[{"id":16434,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16433\/revisions\/16434"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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