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R&R Insurance Blog

Strategies For The Family Owned Business

Posted by Resource Center

Few people have more estate planning issues to deal with than the family business owner. The business may be the most valuable asset in the owner's estate. Yet, two out of three family owned businesses don't survive the first generation due to poor planning.

Following are three concerns all small business owners should address as that plan their estates.

Who will take over the business if you die?

Owners often fail to develop a management succession plan. It is vital to the survival of the business that successor management, in the family or otherwise, be ready to take over the reins.

Who should inherit your business?

This may not be an asset you should split equally among your children. For those active in the business, inheriting the stock may be critical to their future motivation. To those not involved in the business, the stock may not seem as valuable.

Perhaps you entire family feels entitled to equal shares in the business. Resolve this issue now to avoid discord and possible distaster later.

How will the IRS value your company?

Because family owned businesses are not publicly traded, it's usually impossible to know the real value of the business. The final value placed on the business for estate purposes is often determined only after a long and tidious battle with the IRS. It is critical that the owners plan ahead and make sure there is enough liquidity in their estates to pay estate taxes and provide support for their heirs.

Topics: Business Insurance