The recent economic expansion has benefited the owners of family businesses just as it has large corporations, and many have accumulated significant wealth. We recall reading of a consulting firm who polled the owners of 500 family businesses to assess their most important concern. The three major issues of concern were:
• Estate and tax planning to retain their wealth
• Planning for the transfer of ownership
• Enhancement of communication lines within the family
Such issues as family conflicts with respect to business succession, wealth sharing and sibling rivalries which formerly headed owners’ concerns were of relatively minor importance to survey participants. The reason probably is that there is much more money to go around so that intra-family conflict is much less intense than in the past. On the other hand, since many family businesses have prospered extensively, there is much more at stake for first generation business owners in ensuring an orderly business succession. Accordingly they should meet with their attorneys and their CPAs, and perhaps other advisors, well in advance of their projected retirement and devise careful long-range plans for the business transfer to the next generation. Helping owners deal with the important issues objectively and providing professional advice to minimize taxes are just two ways in which we try to provide valuable service in this area. If you need the name or names of other advisors to “round at the team”, well, you should definitely contact me.
Contact me for to discuss business valuation services. Business appraisals for estate planning and related purposes require consideration of many factors, including the taxpayer’s overall family and wealth circumstances, the ever-changing laws that affect estate and gift tax planning, and the inherently dynamic nature of business concerns. Moreover, the valuation of a business interest can be affected by lifetime gifting, the sale of a business interest to outsiders or a shareholder, stability and continuity of the business, the effect of generation skipping taxes, the earnings and dividend paying capacity of the business, the market price of stock of corporations in the same business, and the lack marketability of the business interest, which may often result in a discount. The latter situation arises when there are restrictions on the transfer of stock, when there are no dividend payments, when there are very limited prospects for either a public offering of the shares or a sale of the company, when buy/sell agreements place severe restriction on dispositions of the stock and when business earnings tend to be unstable. Business valuations for estate tax purposes are highly subjective and far more of an art than a science. Thus, in order to obtain a valuation that satisfies tax, retirement and estate planning needs it is essential to utilize an experienced professional who is highly conversant with business valuations for these purposes.
Contact me to further discuss this subject.