At Some Point, The Owner Of A Family-owned Business May Need To Transfer Ownership
Instead of selling the business outright to a stranger, it seems best to transfer it to the employees or to family members. Maybe they’ve been loyal, hardworking, and have a real grasp of what it takes to keep the business going: Is it best to give the business to your employees? Or will you be handing off the family business to family members? What are some of the best way to hand off the family business?
Shares, Options, ESOPs
Some corporations present stock to employees as one way of passing ownership interest to them. Others give employees stock options, or the opportunity to buy stock.
Another way is by forming an Employee Stock Ownership Plan (ESOP). This option can be expensive and may not be possible for smaller businesses.
Self-canceling Installment Notes
With an SCIN, the indebted parties – whether employees or family members – make payments on the note until the seller’s death. Using an SCIN can cause problems with the estate planning and taxes.
Grantor Retained Annuity Trust
This type of irrevocable trust can transfer assets to the trust, but the grantor receives payments from the trust for the time period set out in the trust. In some circumstances, this trust can be a powerful tool for estate planning and wealth transfer. Beneficiaries may receive significant tax benefits. Business owners can use a GRAT to pass stock in the company to employees or family members, while still retaining an income.
- Family Limited Partnership. Business owners may transfer their business ownership and interest to a family limited partnership.
- Self-Financing. Business owners can finance employees or family members who want to purchase the company.
- Private Investment Capital. People who want to buy the company can seek private investment capital to fund their purchase.
Schedule An Appointment Today
The most important thing about handing off the family business is having a plan. For more information or to set up an appointment with a qualified Arizona estate planning attorney, give us a call at (480) 418-8448. Keystone Law Firm is located in Chandler. We offer services for clients throughout Arizona, including Gilbert, Sun Lakes, Mesa, Phoenix, Scottsdale, Apache Junction and Tempe.