The family business is the lifeblood of American industry. Most estimates show that over half of the entire U.S. gross domestic product is generated by family-owned businesses. For good reason, the transfer of the family business is the source of many conversations with our clients. For families holding ownership interests in a business, the overall estate planning objectives of the “senior” generation are closely intertwined with the goals and objectives for the family business.
In creating a plan for the successful transfer of the business , the family should give careful consideration to the following issues:
- Maximizing Value or Maximizing Family Control:. How important is it that the children or grandchildren take control of the company, even if it means that the senior generation foregoes the opportunity to maximize the sale value of the company to a company “outsider” or a key employee of the company?
- Treating Children “Fairly” or “Equally:” Should each of the children receive the same amount following the death of the parents, or should one of the children who has been more involved in the family business receive a greater “value” of the remaining assets following death?
- Equality of Ownership: Especially where not all of the children have been equally involved in the business, would it be appropriate for all children to have an equal ownership stake in the business, or should one child be the sole owner?
- Management Control: Should just child become the sole manager (“CEO”) of the business, or should the management of the business be spread out among the family members?
No two family businesses are alike. Therefore, every plan for the successful transition of the family business will entail different legal structures, conversations, and planning scenarios. Email or call us for an appointment to discuss this in more detail.