As you look to the future, there’s a lot of options when selecting who should run your business once you’re done. A family business transfer is a common exit path.
Keeping the business in the family allows you to still have an attachment to the business. While this type of transfer may not yield as much money and could take longer to complete, there’s many benefits.
- Financial Security: Properly structuring the business transfer can help you receive the amount of income needed and wanted by the end of the transition. With this option, you can design the transfer to retain control of your company during the transition and until receipt of the money you want. This can be achieved through ongoing involvement with the business, profit participation as an owner, and/or sale of ownership.
- Time: Passing the business onto a family member allows for a custom transition, where you can have the next generation take over in 5-10 years, depending on your goals and objectives. The longer timeline gives you more prep time for yourself and your business, allowing time to collect income from salary, perks, and distributions, all while maintaining control.
- Taxes: You may be able to minimize certain taxes. Multiple tax planning techniques can be leveraged to help create a balance among income, capital gains, and gift and estate taxes.
- Values-Based Goals: Keeping your business in the family can help achieve values-based goals in ways a traditional sale may not. Goals like your business’ presence in the community, taking care of future generations, and more.
- Financial Security: Perhaps there is no one in the family who can or will run the business properly. Basing a business transfer on your family ties in this situation can threaten your financial security and your business’ survival.
- Time: Trying to leave your business quickly? Getting paid full value from family often takes several more years than selling to a third party or Employee Stock Ownership Plan (ESOP).
- Taxes: You could pay more in taxes than necessary without proper tax planning.
- Values-Based Goals: If your family does not share your values or goals, the future you see for your company can run amok.
As with most challenges, they can be tackled with proper planning. As you look at the future of your business, MarksNelson can help you craft the right exit path. Our team can guide you through the various options available to transfer your business, with your goals and needs at the forefront.