When estate plans include a family business, owners face a unique set of challenges in establishing continuity and protecting the company during transition. Owners of California-based family businesses will want to carefully think ahead to avoid family disputes over control, keep third-party relationships intact and minimize the estate’s tax implications.
An early step in estate planning for any family business is establishing succession. It’s important to consider who will have a controlling interest in and manage the business. This may include multiple people, and there’s no requirement that the manager be a member of the family of owners. Ensuring stability among customers, suppliers, financiers and other third parties means identifying capable, willing and prepared people for the leadership roles.
Viability during a transition of ownership, especially after death of the owner, also requires some attention to the tax implications of the transfer. Estate taxes can demand a large amount of capital at a time when the business is ill-prepared for it. However, proper estate planning can help minimize tax burdens and ensure a smoother transition.
For the California business owner wishing to provide a long-term source of income security for benefactors, succession is a primary concern in estate planning. Poor management of tax implications can damage the ability to preserve assets and maintain profitability. Choosing an unsuitable leader, or leaving the choice to chance, can result in family disputes and damage relationships with clients and other businesses. An attorney can help choose the correct strategies and provide advice for a stronger estate plan.