Michigan Estate Planning Blog

What Should I Do Now for a Successful Business Succession?

According to the Conway Center for Family Business, family businesses account for 64% of the U.S. Gross Domestic Product (GDP), yet 57% of those businesses have no formal succession plan.

Twin Cities Business’s recent article, “Don’t Wait for the Future,” notes that many businesses are founded on a high degree of personal trust and loyalty, often a simple handshake agreement.

However, these informal agreements aren’t enough to protect you against disagreements and damaged relationships, which can be costly. A lack of business succession planning can negatively impact business owners, as well as their heirs and employees.

There are two key reasons business owners should think about a business succession structure sooner rather than later. One is taxes. Under the current laws, the estate tax exemption is scheduled to sunset in 2025. This leaves business owners with a small window to take advantage of the planning opportunities around this exemption. Second, the absence of a succession structure may result in business disruption at a very emotional time for owners and employees.

The reason why so many business owners are unprepared is that many of them find it uncomfortable or daunting to discuss succession planning or enacting formal agreements. Others don’t truly see the importance of such discussions. And, in other cases, it can be seen as a sign of disloyalty.

The good news is that partnerships can be strengthened if you address this process the right way, with respect for everyone’s point of view and a willingness to listen. The result will be that you’re totally confident that everyone’s interests are secured. This lets you focus on your business, instead of being distracted by unspoken concerns.

Formal contingency plans help business partners clarify their vision for the future. Many are so busy with personal lives, families, and work that they frequently fail to consider the impact of events outside their control. However, these conversations help us think clearly about what we want in the future and what it will take to get there.

If the process is handled correctly, guided by an experienced attorney, the result should be peace of mind and a higher degree of protection for partners and their families.

Reference: Twin Cities Business (April 10, 2023) “Don’t Wait for the Future”

 

When Should I Think About Business Succession?

 

The pandemic has made many business owners rethink their business succession and retirement planning. Insurance News Net’s recent article entitled “Succession Planning For Business Owners: More Important Than Ever” reports that according to PwC’s 2021 US Family Business Survey, only a third of US family businesses have a robust, documented and communicated succession plan in place.
If you wait too long, you may not have the right people in place to run the business. It also restricts the tax planning options for the business and your personal estate. Either error can cause a business to fail, when it passes from one generation to the next.
An exit that is too sudden or without direction can leave a vacuum at the top and damage relationships with existing clients and customers. With clear objectives, a sense of urgency and an experienced estate planning attorney, you can help ensure that your business, and your future, are secure.
There are a number of areas of transition that should be addressed:
Founder Transition: Determine how long you plan to stay with the business, and what your retirement plans are;
Family Transition: If you plan to leave your business to your children, determine the way in which the roles and power relationships will change;
Business Transition: How will the company’s operations and customer relations be maintained through other transitions;
Management Transition: Decide who will make up the new management team, such as family, non-family, or both, and how new leadership will be evaluated. You should also map out the schedule for transferring control of day to day decisions;
Ownership Transition: Determine how ownership is to be transferred; and
Estate Transition: see how you will coordinate your estate plan to ensure that the other transitions above occur as planned.
Many of these transitions will be accomplished through formal documentation, such as an operating agreement, buy-sell agreements and trusts. Sit down with an attorney soon rather than later to sort this out.
Reference: Insurance News Net (December 30, 2021) “Succession Planning For Business Owners: More Important Than Ever”

How to Avoid a Family Fight over Company

A comprehensive succession plan is a set of legal guidelines to ensure an orderly transfer of financial control and executive responsibilities to a new generation of leaders. Index Fund Advisors’ recent article entitled “How to Avoid a Messy Succession Battle” suggests that you take a multi-prong approach to succession planning.
A business owner must identify the individual who has the skills to run a business. A succession plan can sometimes divide the leadership roles, with one person running the business and another in a senior role overseeing long-term development and planning.
Business owners also must consider their personal estate plans when devising a succession plan. Business owners need to be proactive about estate planning and succession planning. Ask an experienced estate planning attorney about both processes as ongoing strategies. That means you don't create an estate plan or a succession plan and file it away until you want to retire. Circumstances can change, so you'll probably periodically need to review it and make sure everything is up-to-date.
When multiple owners are involved, a succession plan should create rules and procedures for other owners who might want to hire friends and relatives for key positions. The company's founders must consider what happens if an owner gets a divorce, suffers a disability, or declares personal bankruptcy. These types of situations can change the rules within a buy-sell agreement—the master document that details the rules between who gets what and how a company is organized in the future.
A succession plan can also state the rules for issues involving transferring of equity and/or shares of a company to family members. In addition to putting into writing exactly who can be a transferee and the amount of equity they're allowed, business owners should use the succession planning process to address issues related to voting rights. A succession plan should also specify the financial terms at the time of an owner's death or sudden exit.
While avoiding such a decision-making process might appeal to younger executives, delaying these decisions and processes creates more uncertainty in a company's ongoing success.
Whatever the size of a business, any business owner needs to create a succession plan sooner rather than later. If you don’t, you may leave a mess for the next generation of owners and employees.
Reference: Index Fund Advisors (Nov. 22, 2021) “How to Avoid a Messy Succession Battle”

Is Estate Planning Really That Important?

Over 50% of our adult population (120 million adults) neither have nor realize the significance of having an up-to-date estate plan to protect themselves and their family’s assets.
Mountain Times’ recent article entitled “Do you need an estate plan?” explains that estate and gift planning is a process that can protect you and your family. It is a very important component of your overall financial planning. This is the perfect time to put your estate planning in order. If you don’t have an up-to-date estate plan and you are seriously ill or injured and can’t manage your financial affairs, a judge will have to appoint someone to manage them for you. The person they appoint might not be the one you would want to perform those tasks.
Without an estate plan, when you pass, your affairs will be settled by the probate laws of the state. As a result, the handling of your affairs can be costly and frustrating for your family.
Your assets may also not pass to your desired beneficiaries. In addition, there’s no way for your assets to be donated to your favorite charities or causes, unless some advance arrangements are made.
Sit down with an experienced estate planning attorney to discuss your goals and objectives. Your attorney can then draft the appropriate legal documents, such as wills, trusts, buy-sell agreements for business owners, durable powers of attorney for financial management and an advance healthcare directive or health-care power of attorney. These documents will help your family at a very difficult and emotional time.
Regardless of the extent of your net worth, estate planning is important for everyone.
Complex strategies may be used by wealthy people to reduce death taxes and costs. However, everyone needs a will and/or trust to pass on property to their heirs and provide for minor children.
An estate plan is an essential part of your financial and gift planning.
The time to create or update your estate plan is now with the help of an experienced estate planning attorney.
Reference: Mountain Times (Oct. 6, 2021) “Do you need an estate plan?”

What Should Small Business Owners Know about Estate Planning?

Not having an estate plan can place business owners and entrepreneurs in jeopardy because they may face difficulties in keeping the business running, if they have to withdraw from the business at any point in time.
Legal Reader’s recent article entitled “What Small Business Owners Should Know about Doing Estate Planning” explains that estate planning is necessary to ensure business continuity. Think about who can take control when you’re no longer around to have the business continue according to your wishes contained in your estate plan. An experienced estate planning attorney can help business owners create a comprehensive estate plan, so things do not become chaotic for their family in the event of premature death or any permanent disability. Consider these steps when it comes to good estate planning for business owners.
Create an estate plan if you haven’t got one. A will is designed to detail your wishes about how you want the business to run and the manner of sharing your property at your death. A power of attorney allows an entrusted individual to undertake your business transactions and manage your finances, if you are incapacitated by injury or illness. A healthcare directive permits a trusted agent to make medical decisions on your behalf when you can’t do so yourself.
Plan for taxes. Tax planning is a major component of estate planning. Our tax laws keep changing frequently, so you have to stay in constant touch with your attorney to develop strategies for decreasing your tax liability, as well as creating a strategy for minimizing inheritance/estate taxes.
Buy life and disability insurance. Small business owners should think about purchasing life insurance, so their families can have a source of income after their death.
Create a succession plan. In addition to estate planning, a business owner should have a succession plan that specifies exactly how your company, and your family will prepare for a transition of ownership. The purpose of a well thought out succession plan is to keep the business operating or to take steps to sell it. This plan also includes the organizational structure of the business in case of maintaining business continuity.
Finally, you should keep everyone impacted by your decisions apprised of your estate plan and your business succession plan.
Reference: Legal Reader (Aug. 26, 2021) “What Small Business Owners Should Know about Doing Estate Planning”

Should I Add that to My Will?

In general, a last will and testament is an easy and straightforward way to state who gets what when you die and designate a guardian for your minor children, if you (and your spouse) die unexpectedly.

MSN’s recent article entitled “Things you should never put in your will” explains that you can be specific about who receives what. However, attaching strings or conditions may not work because there’s no one to legally enforce the terms. If you have specific details about how a person should use their inheritance, whether they are a spendthrift or someone with special needs, a trust may be a better option because you’ll have more control, even from beyond the grave.

Keeping some assets out of your will can actually benefit your future heirs because they’ll get their inheritance faster. When you pass on, your will must be “proven” and validated in a probate court prior to distribution of your property. This process takes some time and effort, if there are issues—including something in your will that doesn’t need to be there. For example, property in a trust and payable-on-death accounts are two types of assets that can be distributed to your beneficiaries without a will.

Don’t put anything in a will that you don’t own outright. If you jointly own assets with someone, they will likely become the new owner. For example, this applies to a property acquired by married couples in community property states.

Property in a revocable living trust. This is a separate entity that you can use to distribute your assets which avoids probate. When you title property into the trust, it is subject to the trust’s rules.  Because a trust operates independently, you must avoid inconsistencies and not include anything in your will that the trust addresses.

Assets with named beneficiaries. Some financial accounts are payable-on-death or transferable-on-death. They are distributed or paid out directly to the named beneficiaries. That makes putting them in a will unnecessary (and potentially troublesome, if you’re inconsistent). However, you can add information about these assets in your letter of instruction (see below). As far as bank accounts, brokerage or investment accounts, retirement accounts and pension plans and life insurance policies, assign a beneficiary rather than putting these assets in your will.

Jointly owned property. Property you jointly own with someone else will almost always directly pass to the co-owner when you die, so do not put it in your will. A common arrangement is joint tenancy with rights of survivorship.

Other things you may not want to put in a will. Businesses can be given away in a will, but it’s not the best plan. Wills must be probated in court and that can create a rough transition after you die. Instead, work with an experienced estate planning attorney on a succession plan for your business and discuss any estate tax issues you may have as a business owner.

Adding your funeral instructions in your will isn’t optimal. This is because the family may not be able to read the will before making arrangements. Instead, leave a letter of instruction with any personal wishes and desires.

Reference: MSN (Dec. 8, 2020) “Things you should never put in your will”

What Do I Need to Know about Creating a Will?

A simple or basic will allows you to specifically say the way in which you want your assets to be distributed among your beneficiaries after your death. This can be a good starting point for creating a comprehensive estate plan because you may need more than just a basic will.
KAKE’s recent article entitled “What Is a Simple Will and How Do You Make One?” explains that a last will and testament is a legal document that states what you want to happen to your property and “worldly goods” when you die. A simple will can be used to designate an executor for the will and a legal guardian for minor children and specify who (or which organizations) should inherit your assets when you die.
A will must be approved in the probate process when you pass away. After the probate court reviews the will to make sure it’s valid, your executor will take care of the collection and distribution of assets listed in the will. Your executor would also be responsible for paying any debts owed by your estate.
Whether you need a basic will or something more complex, usually depends on a few factors, including your age, the size of your estate and if you have children (and their ages).
Having a will in place can be a good starting point for estate planning. However, deciding if it should be simple or complex can depend on a number of factors, such as:
The size of your estate
The amount of estate tax you expect to owe
The type of assets and property you own
Whether you own a business
The number of beneficiaries you want to name
Whether the beneficiaries are individuals or organizations (like charities)
Any significant life changes you anticipate, like marriages, divorces, or having more children; and
Whether any of your children or beneficiaries have special needs.
With these situations, you may need a more detailed will to plan how you want your assets to be distributed. In any event, work with an experienced estate planning attorney. With life or financial changes, you may need to create a more complex will or consider a trust. It is smart to speak with an estate planning attorney, who can help you determine which components to include in your plan and help you keep it updated.
Reference: KAKE (Nov. 23, 2020) “What Is a Simple Will and How Do You Make One?”

Planning Your Family Business Legacy

Sometimes, passing along your assets to the next generation is simply a matter of passing them along. You just let the gift and the potential represented by that gift be your legacy (emphasis on the “sometimes”). However, when the asset is a business, it is rarely that simple. A business is not merely a thing. No, a business is a mindset, an activity and, oftentimes, even a lifestyle. It can get complicated. If your legacy is the family business, then with great responsibility comes the need for equally careful planning, preparation and dialogue. Because every business is different, as every family is different and every individual is unique, what is right for a family business is something to be figured out and understood. That said, businesses have been coming and going for generations. Some have transferred successfully and others less so. Consequently, there are some tried and true strategies to consider when planning for your own family business succession. Whether your objective is a sale, windup or succession, Forbes has provided a practical roadmap in a recent article titled “Six Steps For Making Your Business A Family Legacy.” Here are the six steps by heading alone: 1. Give the family a reason to continue the family business 2. Develop a management team 3. Structure a business succession plan 4. Fund the business succession plan 5. Wealth replacement for other family members 6. Have a successful business So what is right for you, your family and your business? I recommend reading the original article and then consulting with your team of professional advisors. Your attorney, accountant, financial planner and insurance agent will each bring a valuable and unique skill set to the table.

Reference: Forbes (February 3, 2014) “Six Steps For Making Your Business A Family Legacy”

For more information, see www.jerryreiflawyer.com

Mixing Business and Friendship Can Be Risky Mid-Michigan

Have you considered co-founding a new business with family or a friend? If so, you’re not alone. About half of all startups today are organized among friends, family members or spouses. It makes sense, too, because in today’s competitive business climate, startup entrepreneurs want to pursue their most ambitious goals with people they trust. However, when working with friends, expectations of loyalty and understanding are higher than is common among everyday work colleagues. And when friends let us down, resentments can linger and cause a deep divide in both work relationship and personal relationships. Here are five ways startup misunderstandings can spiral out of control and potentially end friendships, according to Fox Business. #1: Unmet Expectations. The typical startup business will take a lot more time and money to become profitable than anyone ever expects. #2: Work Style Conflicts. Even though friends get along great when hanging out at the bar, this compatibility may not resonate in the office environment. #3: Business Strategy Disagreements. New startup partners tend to be well aligned to the grander goals of an organization, but rarely have worked through the nitty gritty details of how to achieve these goals. #4: Spending Conflicts. One of the most common areas of disagreement is spending authority and budget priorities. #5: No Way Out. What happens when one partner wants to sell out, quit or reduce involvement in the business? A recent Forbes article, titled “Co-Founding With a Friend - - Without Decimating a Friendship,” shares a few words of wisdom from successful businesses founded by friends. One startup says “when making decisions, we make the conscious decision to not be disrespectful because at the end of the day, we want to stay friends.” Another startup recognizes the importance of keeping work and personal lives separate. In short, to avoid these business and friendship ending misunderstandings, it is important to discuss all issues that might interfere with productive business building.

References: Fox Business (June 13, 2011) “Why Co-Founding a Business Can Decimate Friendships”

Forbes (December 12, 2012) “Co-Founding With a Friend – Without Decimating a Friendship

For more information, see www.jerryreiflawyer.com

Business Succession – A Lesson From The Royals Mid-Michigan

Likely you have seen and maybe read a steady stream of articles on the subject of “business succession.” As the demographics reveal, there is a tidal wave of aging baby boomer business owners who will be passing the baton by design or by default. The latter is a much messier affair than the former. If you are a baby boomer business owner, then consider a family that has some real life experience in managing successful successions – the Royal Family. For some royal perspective and thoughts on the young Prince George Alexander Louis (the instant media darling and infant son of Prince William and Kate Middleton), WealthManagement.com recently offered an article titled “A Lesson from the Royals: Succession Is a Two-Way Street.” Succession really is a two way street. In one lane, it is the king stepping down to name his successor. In the other lane, it is his successor seeking to prove himself worthy to be the king. The principal is the same in business, and yes, even in small family businesses. The perennial problem is that a business requires tested leadership and ability. Unfortunately, real life experience is a very difficult thing to acquire until you are actually holding the reins. That noted, few business owners are comfortable handing over reins even to their own successors. If you are a would-be-king, then there are some principles to learn to prove yourself, to stand out, and to step up to the task on your own. Fortunately, the original article offers some practical advice. And then there is the other side. As the current business owner – king of all you oversee – you also need to be mindful to give your successor some “playing time” while you can coach them. The actual act of transferring the business can be complicated, for reasons legal and financial. As with any “dance,” timing is key. If your family business is worth keeping afloat, then the successful succession of its leadership is as great a goal worthy of your time and focus. The Owner has retired; God save the Owner.

Reference: WealthManagement.com (August 30, 2013) “A Lesson from the Royals: Succession Is a Two-Way Street”

For more information, see www.jerryreiflawyer.com

 

Business Succession – A Lesson From The Royals Saginaw, MI

Likely you have seen and maybe read a steady stream of articles on the subject of “business succession.” As the demographics reveal, there is a tidal wave of aging baby boomer business owners who will be passing the baton by design or by default. The latter is a much messier affair than the former. If you are a baby boomer business owner, then consider a family that has some real life experience in managing successful successions – the Royal Family. For some royal perspective and thoughts on the young Prince George Alexander Louis (the instant media darling and infant son of Prince William and Kate Middleton), WealthManagement.com recently offered an article titled “A Lesson from the Royals: Succession Is a Two-Way Street.” Succession really is a two way street. In one lane, it is the king stepping down to name his successor. In the other lane, it is his successor seeking to prove himself worthy to be the king. The principal is the same in business, and yes, even in small family businesses. The perennial problem is that a business requires tested leadership and ability. Unfortunately, real life experience is a very difficult thing to acquire until you are actually holding the reins. That noted, few business owners are comfortable handing over reins even to their own successors. If you are a would-be-king, then there are some principles to learn to prove yourself, to stand out, and to step up to the task on your own. Fortunately, the original article offers some practical advice. And then there is the other side. As the current business owner – king of all you oversee – you also need to be mindful to give your successor some “playing time” while you can coach them. The actual act of transferring the business can be complicated, for reasons legal and financial. As with any “dance,” timing is key. If your family business is worth keeping afloat, then the successful succession of its leadership is as great a goal worthy of your time and focus. The Owner has retired; God save the Owner.

Reference: WealthManagement.com (August 30, 2013) “A Lesson from the Royals: Succession Is a Two-Way Street”

For more information, see www.jerryreiflawyer.com

 

Is Your (Business) Succession Secure? Saginaw, Michigan

“Succession” seems to be such an old concept – one that invokes kings, not necessarily entrepreneurs. When it comes to business, however, succession is perhaps the most fundamental concept and object of planning. “In every end is the beginning.” No truer words could be written when it comes to planning the successful succession of a small business. If business succession is on your mind then you will want to read a recent Forbes article titled “How to Succeed At Succession.” Before you read the original article, remember this – the questions are as important (if not more so) than the answers. So, what kinds of questions should you be asking yourself? Here are a few to ponder: Do you want the business to live on past you? Who ought to lead it? What is the business in the context of your own estate or the estates of your partners? Do you have an exit strategy in the event of retirement, disability or death? In the end, make sure you consult appropriate legal counsel. This area of planning is not a do-it-yourself project.

Reference: Forbes (January 15, 2013) “How to Succeed At Succession”

For more information, see www.jerryreiflawyer.com

 

Business Succession Rejections by Heirs

When it comes to the succession plans of a family business, there are many things to ponder when selecting an heir. Important attributes like responsibility, work ethic, and leadership are taken into consideration when deciding who choose for the business. One thing that you may have left out is what to do if your heir turns down the offer to take over the family business. Then what? If you are a family business owner, are you intending to keep the business in the family even as you step down from control? Have you considered the possibility of designating an heir who does not want the family business and do you have a “Plan B” to adjust your succession plans accordingly? The reasons why an heir may resist taking up the reins to the family business are many facetted, but that doesn’t necessarily mean they are making a final, informed decision. No, it may take time, talk, and some understanding, and there are lessons to be gleaned from a recent Forbes article on the subject titled “5 Ways Family Business Founders Can Change A "Made Up" Mind.” Deciding on a successor for your business can take patience, time and understanding. This aspect of estate planning isn’t just about your own wishes, but also about the hopes and dreams of your family members and heirs involved.

Reference: Forbes
(September 10, 2012) “5 Ways Family Business Founders Can Change A
"Made Up" Mind”

For more information, see www.jerryreiflawyer.com

 

Small Business “Smoke And Mirrors”?

There’s a lot of movement on Capitol Hill these days, or at least there is the potential for it, and it’s largely in the name of small business. President Obama has recently expanded his cabinet with the addition of the chief of the Small Business Administration (SBA). Is it going to work for you? As reported here in Businessweek, and in many places beyond, President Obama has launched an initiative to reorganize and condense six of the agencies responsible for various segments of the economy, not least of which being the SBA. There is still concern that it may end up being a largely symbolic gesture, and perhaps also only a pre-election “political move.” So, how will it affect you?

According to Robb Mandelbaum over at the New York Times, the reaction is mixed amongst small business persons.

Reference: Bloomberg Businessweek (January 13, 2012) “Obama Makes SBA Chief a Cabinet Member”

Unique Assets Require Unique Planning For Risk Management

Not so fast: With unique assets, things aren't always straightforward. More specifically, owners of unique assets - such as family businesses, legacy real estate and valuable art, coin and other collections - need to consider specialized risk management. When you own a small business, and especially if you and your family are the sole owners of a not-so-small business, it’s important to remember that personal planning and financial planning are not separate activities. Unique assets call for comprehensive planning; whether legacy real estate or a valuable collection, but this is especially true if the asset is a business. Financial Planning recently ran a piece on this very issue and I thought it was worth passing along. According to the author, you likely practice some form of risk management in your business. In fact, you probably know all too well that things don’t always go along as planned, and, when Murphy’s Law strikes, there’s a great deal at stake. An even greater source of risk is personal when your business life, personal and family lives are one and the same. In short, you need a risk management plan for your business, yourself and your family in the form of comprehensive estate and succession planning. The original article has much more to say on the topic, with some stories that sound all too familiar.

Reference: Financial Planning (October 1, 2011) “To Collect and Protect”

ESTATE PLANNING

Watching the market nowadays is hardly a soothing pastime. It seems that once again we’re watching our futures in ticking numbers and advancing line graphs. There is, at least, some solace to be found in volatile markets for the careful estate planner, however. Indeed, there are a number of ways that the present woes of the marketplace can create a useful estate planning environment, and a few of them can be found in this recent article from the Wall Street Journal. In large part the advice divides between whether you have holdings in private or public stock, but there are three ideas. If you have holdings in private stock, then volatility raises the possibility of greater discounts when gifting. In general, private stock can have discounts up to 30% or 35% applied when they are gifted simply because, without public trade, it would have been harder to find a buyer and the IRS takes note of that fact. The IRS, thankfully, can also be persuaded to take note of market volatility and its affect on the sale of private stock. With volatility too high (hovering around 40 by the Chicago Board Options Exchange Volatility Index) discounts might range as high as 40% to 50%. If you have public stock, then consider a Grantor Retained Annuity Trust (GRAT). As many readers will know, a GRAT works like a trust turned annuity, since you put assets in a trust and thereafter receive payments for a set period. The principle benefit is the ability to give away assets without paying tax on the appreciation. With markets as they are, and with interest rates at such lows, timing could be perfect to form a GRAT around depressed assets and lock out the tax-man when those assets bounce back. (The GRAT just has to rise above the IRS’s “hurdle rate” presently 2.2% a year.) Finally, even simple options can work wonders: with low interest and low stock prices, it may also be the time to make an interfamily loan to fund an investment. Using the loan to purchase depressed stock (or depressed real estate if you have faith in that market) can secure that appreciation for your family member. These are a few of the WSJ’s ideas to get started. You’ll find some more out there (like Deborah Jacobs’s recent advice on gifting), but in general it’s a good time to look over your assets and your plans with your counsel. You need to weather the present storm, yes, but there’s more work to be done too.

Reference:  The Wall Street Journal (August 20, 2011) “How Volatility Eases Estate Planning”

ESTATE PLANNING / BUSINESS SUCCESSION

If you’re a business owner, you may be enticed by the idea of selling your business and walking away with the cash … but chances are you’ll have a hard time cutting ties with the business you built. A recent article on Forbes.com tells the story of a business owner of 25 years who finally decided to sell his business, since his sons had no interest in running it. He spent hundreds of thousands of dollars and a year of his time prepping to sell, but walked away at the last minute. Forbes calls this “seller’s remorse,” and it’s a fairly common ailment of successful entrepreneurs. According to Forbes, the problems entrepreneurs suffer when selling their businesses stem primarily from what psychologists call “locus of control issues.” In essence, someone who has, for most of their career, initiated all of the action, finds themselves in the uncomfortable position of being passive and reactive to the strategies and directives of others. Authentic entrepreneurs are unique creatures, business geniuses that defy convention by thinking less about wealth and rewards than challenge, wining and making a mark on society. If you are a business owner considering selling your business, you may be well-advised to come to terms with the idea before you dive into the process. You will be ceding control of your business, in exchange for cash. Best to wrap your mind around that issue sooner rather than later. You can learn more about business succession planning, and the unique challenges facing business owner on our Business Succession Practice Center on our website.

From Forbes.com (June 1, 2011) “It’s Your Baby – Now Say Goodbye”

SMALL BUSINESS / BUSINESS SUCCESSION

Some entrepreneurs build up and sell a dozen or more businesses during their lifetimes, but for most, their one and only business exists as the product of many years of blood, sweat, and tears. Selling the business – whether to family members or others – is something most business owners contemplate at some time during their ownership. Before you begin the process of selling your business, you should thoroughly explore the tax ramifications, as they can greatly impact your final “take away’ from the deal. In fact, these are questions you may want to consider before forming your business, especially if you hope to one day sell and reap gains from your years of effort. Consider this example from a recent article in Forbes: if a C-corporation sells its assets for $5 million, with a $2 million basis, the $3 million gain will be taxed to the corporation at up to 35 percent, leaving only about $3.9 million for distribution to shareholders. And don’t forget that when the shareholders receive the distribution, they must pay tax at their individual rates. Of the $3.9 million distributed to them, how much tax they pay depends on their basis in their shares and other variables – but there will be two levels of taxation. You can learn more about business succession issues in the Business Succession Practice Center on our website. While you’re there, be sure to sign up for our free monthly e-newsletter to stay abreast of news as it affects you and your estate. Reference:  Forbes (July 26, 2011) “But Who Pays Tax on Business Sale?