Rising Gft Tax Urges Small Family Business Owners To Plan for Succession

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FAMILY BUSINESS CONSULTING 

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Currently, an individual can gift, over his lifetime $5.12 million tax-free. Starting in 2013, the lifetime limits on gift tax will fall from $5.12 million to $1 million. This change in tax exemption rates between 2012 and 2013 could factor into your small business succession plans.

The complicated history of the gift and estate tax dates back to the tax cuts passed under President George W. Bush, starting in 2001. 

Those laws enforced by Bush gradually increased the dollar amount exempt from gift and estate taxes. Congress wrote the law to expire in 10 years, with the exemption reverting back to the old levels in 2011. In December 2010, the Tax Relief, Unemployment InsuranceReauthorization, and Job Creation Acts were signed into my by President Barack Obama as a compromise bill, extending the Bush cuts through 2012 and holding the gift tax exemption at $5 million ($5.12 million in 2012, adjusted for inflation). 

The compromise bill called for the lifetime gift tax exemption and gift tax rates to revert to 2001 levels of $1 million, starting in 2013. 

“Assuming a parent wants to turn over 100 percent of the business to his children, the best year to do it is in 2012,” (BusinessWeek.com). There are many other factors to consider in business succession including managerial roles, how the business assets will be divided up between the children, and whether the company founder is ready to give up complete control (BusinessWeek.com). 

Blair Trippe, Partner and Consultant at Continuity Family Business Consulting, says to also carefully think about voting control when transferring ownership of a family business. You wouldn’t want siblings who own and work in the business to be essentially working for their siblings who also are owners. Those not actively in the business may not be in a position to make good decisions for the business and hence shouldn’t have voting control. 

This exemption on gift tax expiration is the perfect opportunity to decide who will take the reins of the business and put the plan into action. Oftentimes business owners hesitate to make that call because they worry about whether their offspring can handle the money and responsibility, and whether they will be able to withdraw enough funds from the business to live comfortably in retirement. 

Blair Trippe also says it’s not just about saving on taxes. “Be sure not only to consider tax savings, but to consider what will be thought of as ‘fair’ in terms of diving up assets, and what will benefit the family most over the long term. This can be approached in many different way so it’s important to be clear on the intentions behind the transfer of ownership, not just the savings on the taxes.”

Transitioning a business from one generation to the next is probably the most difficult and complex process a family business will face. Contact Continuity Family Business Consulting to assist in the process. We work closely with estate planners, CPA’s, key non-family executives and family stakeholders both in and out of the business in order to develop a plan that works for both the company and the family. Contact us at 877-925-5149 or email us at info@continuityfbc.com.

The Importance of Governance in a Family Business

 CONTINUITY

FAMILY BUSINESS CONSULTING 

US/CANADA: 877-925-5149 INTERNATIONAL: 1-978-925-5149

ContinuityFBC.com

 

The importance of governance, no matter how small the company, cannot be overstated.  

Formal boards, executive committees, and advisory boards develop and articulate policy, objectives and strategy.  They provide strategic guidance and are the most effective vehicle for resolving businessrelated conflict between managers, owners and other family members.  

Developing effective governance for a family business involves appropriate procedure (attending to the right priorities, operating by the right rules) and good structure (selection of the right people and roles).

Early stage family businesses may be struggling to develop good governance practices and may be wary of creating formal boards or engaging independent board members.  Helping these stakeholders understand and practice good governance as a first step towards board development can be enormously helpful especially as part of a succession planning process.  

Creating a first board, while retaining control, is a big step for many founders of family businesses and one which benefits greatly from independent advice. 

For more information on Governance and Board Development, visit ContinuityFBC.com.

Understanding Family Systems Within Family Businesses

 CONTINUITY

FAMILY BUSINESS CONSULTING 

US/CANADA: 877-925-5149 INTERNATIONAL: 1-978-925-5149

ContinuityFBC.com

Families are systems – just like businesses – with organizational charts, policies and procedures, required skill sets, and structural risks and opportunities.  Understanding these less transparent and highly emotional systems is crucial to working with family businesses and helping them succeed both as businesses and as families. 

Family systems assessments are typically the most enjoyable and interesting part of Continuity’s engagements with clients.  When family members better understand the system they are operating in, they see each other in a new light and often find ways to more meaningful and less conflictual relationships. 

For more information on Family Systems with Continuity Family Business Consulting, visit ContinuityFBC.com, LIKE us on Facebook, and FOLLOW us on Twitter. 

Business Strategy with Continuity Family Business Consulting

 CONTINUITY

FAMILY BUSINESS CONSULTING 

US/CANADA: 877-925-5149 INTERNATIONAL: 1-978-925-5149

ContinuityFBC.com

Continuity, LLC is a leading family business consulting firm that develops comprehensive strategies for enterprising families to thrive together as owners, managers and family members through succeeding generations. We serve clients across the US and abroad.

As part of our engagements, we are often asked to discuss business strategy with our clients.  Especially when stakeholders disagree with corporate vision and mission or the state of the market, we provide evaluative techniques to help clients achieve consensus. 

By asking the tough questions concerning the marketplace, technology, competition, financial and organizational strength, personal goals and other metrics, we help clients make the right business decisions.

Blair Trippe, Expert Negotiator, Mediator & Family Business Consultant

CONTINUITY

FAMILY BUSINESS CONSULTING 

US/CANADA: 877-925-5149 INTERNATIONAL: 1-978-925-5149

CONTINUITYFBC.COM 

As we’ve mention in previous posts, the Continuity Family Business Consulting Team has credentials from top schools and professional societies with extensive, relevant and practice experience in the real world. 

Blair Trippe, a Partner at Continuity FBC, brings a highly specialized approach to the understanding of family systems and the relationship challenges encountered when families work and own together. Her expertise as a negotiator, mediator and family business consultant is grounded in the study of strategic management and conflict resolution methodologies. 

In addition to Blair’s experience with Continuity clients, she was also an in-law of a multi-generational family managing a 7,500-acre farm, a Marketing Specialist at Prudential Bache Securities and The Marketing Manager, Director of New Product Development and Director of Industry Affairs at a start-up firm in the medical device industry. 

Blair co-authored the book, “Mom Always Likes You Best – A Guide to Resolving Family Feuds, Inheritance Battles & Eldercare Crises.” The practical guidebook helps family members become better decision-makers, mindful negotiators and more effective communicators. 

Her leadership in the Mediation field helped create a new specialty through the development of “Elder Decisions” – a division of Agreement Resources, LLC, a consulting firm she co-founded. Agreement Resources provides conflict resolution, mediation and training services to families and a variety of organizations, and is an approved services provider to probate courts in several counties of Massachusetts.

As a workshop facilitator and trainer, Blair has conducted sessions for the EPA, The Harvard Program on Negotiation at Harvard Law School, Judge’s Institute, American Bar Association, National Association of Geriatric Care Managers, Alzheimer’s Association, the Northeastern University Center for Family Business, Massachusetts Collaborative Law Council, Northeast Human Resource Association, Dartmouth Hitchcock Conference on Alzheimer’s Disease, Just a Start House, and the Family Firm Institute, among others.

Blair received her MBA from the Kellogg School of Management, with a concentration in marketing and finance, and a BA in psychology from Connecticut College. Her memberships and certifications include: 

Professional Certifications:

• Program on Negotiation (negotiation and dispute resolution, mediation and participatory process) – Harvard Law School

• Certificate in Family Business Advising – Family Firm Institute

• The Center for Dispute Resolution (negotiation and teamwork teaching) – Northwestern University

• The Center for Social Gerontology (elder mediation) – Ann Arbor, MI

• Mediation Works, Inc. (executive and advanced mediation; negotiation skills)

Memberships:

• Association for Conflict Resolution/New England (former board member and chair of the education committee)

• Massachusetts Council on Family Mediation

• International Ombuds Association

• Family Firm Institute

Community Leadership:

• Trustee – The DeCordova Museum and Sculpture Park, Lincoln, MA – 1998 – 2011

For more information on Blair Trippe and Continuity Family Business Consulting, visit ContinuityFBC.com.