Who Will Run Your Minneapolis-Area Business When You're Gone?
You've worked hard to build a successful business. Over time, it has become a fixture, a source of pride, a constant in your family's lives. We know how you feel, as we are business owners ourselves here at the Roulet Law Firm. However, we have a question: have you thought about what will happen when you are no longer there running your business?
Only a small percentage of all family-owned companies survive to be taken over by a family's next generation. An even smaller percentage makes it to the third generation. A microscopic 3% of these businesses operate into the fourth generation and beyond.
The reason, as our skillful estate planning lawyers will tell you: most business owners simply don't have an exit strategy. They ignore estate planning responsibilities, which often results in unnecessary estate taxes that drain the life out of their businesses. Also, for whatever reason, they neglect to plan for a smooth transition to the next generation.
Who could take over your business? You may have more choices than you think.
Your Business Succession Options
Family members are often a logical choice for business succession. Most business owners take pride in being able to hand over a family business to a child. You may already have one or more children working in the business with you.
Depending on your financial needs and priorities, you can gift or sell your business to family members. Some techniques provide you with retirement income and let you transfer the business at a discount, saving estate and gift taxes in the bargain. Most let you retain some control over its operation.
Be sure to consider family members who will not be involved with the business. Life insurance is often used to "equalize" inheritances. You also need to objectively consider the abilities of family members whom you consider potential successors.
Business partners might also be in line to succeed you. You can have buy-sell arrangements with each other so when one of you is ready to retire or dies, the other automatically buys his or her share of the business. Life insurance is often used to fund these arrangements.
Your employees could also be a source. An employee stock ownership plan allows your workers to reap the benefits of ownership while you retain control until your retirement or death.
Charitable trusts can provide terrific income, capital gain, and estate tax savings. With a charitable remainder trust, you can receive a lifetime income. You also have the added benefit of helping a charity that has special meaning to you.
Of course, you can also consider an outright sale to another company. However, the tax benefits are usually not as favorable as other planning options.
Your business succession planning legal needs are important to us and should be especially important to you too, as your company's fortunes increase in the coming years. Schedule your complimentary, no obligation initial consultation with Chuck Roulet today by phone at 763-420-5087 or e-mail at [email protected]
We're available on weeknights and Saturdays too.