The family business is prospering but what would happen in the event of your absence?
The Small Business Review conducted a study in the summer of 2001 and revealed some interesting facts for business owners: Only 30% of all family-owned businesses survive to the next generation; 12% of businesses make it to the third generation; and 3% are functioning into the 4th generation and beyond.
Think about those statistics for a moment. Now consider why the family business is no longer a family business.
Sadly, most business owners do not plan a graceful exit. They do not do proper estate planning, which results in unnecessary estate taxes as well as little planning for a successful transition to the next generation of business owners.
With proper planning, a business owner can gift and/or or sell the business to family members and still maintain a retirement income.
If you have a business partner, it is common to establish a reciprocal buy/sell arrangement. When one partner is ready to retire or dies, the other automatically buys his/her share of the business.
Another option is an Employee Stock Ownership Plan which allows employees enjoy the benefits of ownership, yet the owner can keep control until retirement or death.
Another option is the sale of your business at the time of death or retirement. Beware, the tax benefits are not as good as other planning options.
