By Fredrick P. Niemann, Esq., a NJ Estate Planning Attorney
Owners of family businesses often look forward to the day they are able to retire and pass on the business to their child or children. This not only allows them to relax, but is also a proud time where they can watch their children take control and manage the business they’ve worked hard at for so many years. Unfortunately, many family businesses are not successfully transferred to children due to the unforeseen challenges that business owners are presented with when it is time to transfer the business. Planning for the future transfer of your business today can significantly increase the likelihood that you will be able to successfully pass your business along to your children.
You are probably saying to yourself, “I know when I am going to retire and I know my son/daughter wants to take over, so what could possibly prohibit that from happening?” Unfortunately, lack of a capable or interested successor for your business is not the only problem. The most significant challenge to family business owners wishing to transfer their business is taxation. Most unsuccessful family business transfers fail due to this obstacle. Depending on how you transfer the business, whether it be by passing it through your estate, gifting it at some point in your life, or placing the assets in a trust and passing it to your child via that trust, different tax implications arise. The financial situation of your business and timing of the transfer are some of the factors to consider when choosing the appropriate method of transfer. If you do not plan for the future transfer of your business and do not consult an experienced estate planning attorney as to the appropriate method, you will likely be forced to pay undesirable tax rates, which could lead to the collapse of your business if you are not able to pay these rates.
Other challenges to successful business transfers include lack of teamwork among family members (usually when one child is receiving more responsibility or ownership than another), second-thoughts by owners about letting go, and lack of planning for the direction of the business to name a few. Meeting with a knowledgeable business succession attorney to plan the future transfer of your business can make all of the difference and help give you peace of mind that you will not be met with unforeseen challenges when it is time to transfer to your business to your children. Please call Fredrick P. Niemann, Esq. toll free at 888-800-7442 or email him at firstname.lastname@example.org/ today. He wants to discuss this important business matter with you.