The outlook for the survival of a family-owned business after the death of an owner is not bright: more than 70% fail when transferred to the next generation. If you have a family business, it is very important that you include in your estate plan strategies for keeping the business alive and viable after your passing. Your first step in this process is to hire a strong and knowledgeable College Station estate planning attorney. The following explains some ways to protect your business so that it provides for the next generation.
Why Do Family Businesses Fail?
There are many reasons for a family business failure. The successor may not have the knowledge to run the operation or have difficulty handling finances. There may not be enough cash equity to keep the business afloat. Or estate taxes could force a sale of the business. What ultimately most often causes a business failure, however, is lack of planning.
Consider that about 9 out of 10 businesses in this country are family-owned, and that at any given time about 40% of these are transferring ownership, and the problem is sizable, indeed. The question, then, is what can be done?
Planning for Family Business Succession
There are many tools that can be effective in business succession, and your attorney will help you determine what best suits your needs. Probate costs can erode businesses, and if proper planning is not made, the business may not provide the family with a source of income. Among the tools that you may need are:
Will: Without a will clearly delineating how the business will be transferred, it will be at the discretion of the probate court to decide its future.
Revocable Trust: The grantor of the trust places funds into it. Upon his death, the business is released to the heirs without passing through probate.
Family Limited Partnership: The partnership gives interest in the business as a gift.
Business Buy-Sell Agreement: The BSA can be in the form of an Entity BSA, Cross-Purchase BSA, or Wait and See BSA. An option is the One-Way BSA. Your attorney can discuss what each of these entails.
Work with an Attorney if a Family Business Is Part of Your Estate
It is important that you work with a College Station estate planning lawyer if you own a family business that is a part of your estate. Without careful planning, the business could well fail when transferred. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.