Family-owned businesses pose particular challenges and typically involve unique planning dynamics. Each family-owned business will present circumstances specific to the organization and operations of that business. This blog explores many aspects of intergenerational transition challenges of family-owned or family-dominated businesses. 

The plan design process must be detail-oriented, strategic, and forward-focused, and the family’s planning objectives will be predicated on the individual conditions presented. Therefore, the most effective plans will prioritize the family’s most important objectives.

To Keep or To Sell?

The owners of successful family businesses are inevitably faced with the question of whether to sell the business or to keep the business and pass it on to the next generation. Both options present their own obstacles. Selling the business will undoubtedly create a tax liability for the owners, while conversely, passing the business to the next generation may trigger estate tax. However, in both circumstances, there are methods to address tax liability efficiently. 

There are a handful of additional factors that are to be taken into account in determining whether to keep or to sell the business. 

• Emotional ties to the business and how to make an objective decision;
• Evolving risks, such as competition, consumer market and expectations, competition, global developments, and changes in regulatory authority;
• The market for the family business;
• Willingness of potential heirs; and 
• Other key business indicators. 

Our firm comprehensively analyzes these risks, thoroughly discussing options with clients. Our attorneys advise clients on these factors and configure plans that manage risks effectively in light of the client’s goals and objectives.

Strategies for Transition

The plan design typically includes a program for transfer of stock or ownership to other family members. There are strategic options, including:

• Gifting ownership;
• Utilization of trusts;
• Sales of stock in the company; and
• Sales of stock to other family members. 

Often, combining these strategic options yields a result that best meets the owners’ goals and objectives. 

Other Possible Issues

As previously mentioned, family business transition can involve a multitude of factors. For example, some owners of family businesses have multiple children, but only one child plays a role in the business. In this case, the owners want to distribute the ownership equitably to all their children, and the children have built an expectation of an inheritance of the business. However, it may be in the best interest of the business to allow the child playing a key role in the company to maintain control. There are methods to financially enrich the uninvolved children while simultaneously providing control over the business to the insider-child. 

Seek Experienced Lawyers to Guide You Through Your Family’s Business Transition

We always recommend seeking the counsel of an experienced attorney when it comes time to transition your family owned business. Our team of legal experts understands the unique and complex considerations that must be taken into account when planning a family owned business. We will guide and advise you throughout the process on desired results, options, and risks. 

Our team has assisted business owners with this often tedious and complicated process of transition planning. We understand the legal implications of our clients’ goals, and are experienced in preparing the necessary documents. With our help, you can confidently change your ownership in your business, knowing the process is in qualified hands. We will guide you throughout the entire process.

Have Questions? Let's Talk

Contact the law firm of Howell, Buchan & Strong at 850-877-7776 to set up a FREE no-obligation consultation. Our firm represents physicians, nurses, psychologists, and other licensed professionals statewide. 

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