Transitioning your business

Carla*, a successful small business owner, wanted to pass on the business to her children in a tax-effective way. She also decided to use this milestone as an opportunity to examine ways to develop the business, including implementing new marketing strategies, structuring a successful management team, and reviewing options for establishing employee benefit plans.

We spent a good amount of time with Carla learning about her business, her total financial situation, and her goals for the future. Our discussions persuaded us that a Family Limited Partnership ("FLP") was an attractive solution for Carla for several reasons. First, an FLP is a financial instrument that allows the owner to transfer assets (in this case the business) to family members without relinquishing control over them. Once transferred, the value of the business is removed from the estate, lessening the tax burden. This structure has the added advantage of allowing the business owner to monitor the development of the business before bowing out completely from its management.

We suggested that Carla and her family first review and update the company business plan in light of the current business environment. Exploring capital investments in new hardware and business software would be the next step in the process of modernizing the business. We worked with Carla and her children to determine the profitability of various business segments, increase efficiencies within the business, and implement new marketing strategies. We also outlined the cost structure of various health plans, as well as other pension and profit-sharing plans for her.

As a prelude to restructuring the company's management team, we sat down with the family to discuss each family member's interest and aptitude for managing different aspects of the business and suggested they consider bringing in outside managers in areas that required specialized or technical expertise. We also advised establishing an ongoing relationship with a business coach to keep the managers energetic and focused on the company's long-term goals.

In the end, we were able not only to help Carla transition her company in a tax-effective way, but also to help her position it for future success by tackling issues of succession planning, benefits, and overall business strategy going forward.

* Names and some details have been changed to protect client confidentiality. Your particular situation can differ based on your unique needs and objectives.