Take The Lead And Plan For The Future
To say that family businesses are the backbone of America’s financial system is an overstatement, ninety percent of businesses are owned or controlled by the family. Businesses range from big to small from agriculture, technology to manufacturing. It is estimated that family businesses create one-half of the Gross National Product as well as pay for half of the wages received in the United States.
When you think of a family business you may think of a traditional small business, however, one-third of all businesses are integrated into the Fortune 500. This includes family businesses as well, but family business statistics are not always promising.
Family businesses can be passed down from one generation to another. When a transfer takes place, it can either make or break the business. As statistics show that two-thirds fail after a transfer, while one-third survives.
Family businesses do not always survive because of various reasons; however, the main causes of failed transfers are people, taxes, as well as capital. Nevertheless, Business Succession Planning can help with keeping a business surviving through any number of transfers.
Every family business, members will retire and pass on the business to the next family member. Other common reasons for a business going through a transfer are disability or death.
Small Business Owners in California you can take the steps to ensure your business is protected from any change in ownership down the road.
PLANNING FOR THE FUTURE OF THE BUSINESS
Asking easier said than done type of questions should be answered. Questions such as; who will take over when I am gone? Is your spouse willing to step up and take charge? Will your loved one be economically deprived? If questions are not answered, a business that was made through years of hard work and dedication can be crushed within a day.
To prevent a business from being destroyed thinking ahead and taking the necessities in order to safeguard your life long work.
Our Redkey Gordon Law Corp in California Include the Following Practice Areas:
THE UNCERTAINTY OF ESTATE TAX
Change within Congress as well as the White House the insecurity of the certainty of federal taxes. Although, certain states now have their own estate taxes to enforce, being independent if federal estate taxes.
By being vigilant in observing economic, political, as well as legal climate is crucial, without suitable estate-liquidity planning it is possible that the business could be sold just so the estate tax is met.
ORGANIZING FINANCIAL AND ESTATE PLANS
To keep a family business from failing after any transfer, organizing financial and estate plans can allow for an adequate amount of cash to support your objectives. When a suitable estate plan is present, any business debts along with life insurance containing the proper amount, type, and manner can be spent to handle these matters.
BUSINESS BUY-SELL AGREEMENT (BSA)
Business Buy-Sell Agreement is a contract that defines the best interest of the business in the occurrence of a retirement, disability, and even the owner’s death cause a transfer. With a BSA interest of any kind of business, entity can be transferred, include a corporation, partnership as well as a limited liability company. Having a BSA is valuable for a business that has one or even more than one owner. Since a Business Buy-Sell Agreement is a contract, it is binding on third parties (estate representatives, heirs of owners). This attribute can be helpful when a smooth transaction of ownership is taken as well as the business to continue.
THE STRUCTURE OF A BUSINESS BUY-SELL AGREEMENT (BSA)
There are three regular plans of a BSA; Entity BSA, Cross-Purchase BSA, and Wait-And-See BSA. The Entity BSA agrees to buy the interest of a business. The Cross-Purchase BSA is an agreement that owners agree to buy one another interests. A Wait-And-See gives the one owner the first choice of buying the interest prior to other business owner(s).
Besides these three familiar agreements a One-Way BSA can be applied when there is only one owner and the buyer being a third party. Choosing the correct Business Buy-Sell Agreement (BSA) is essential do to tax as well as non-tax reasons, with a respectable support plan a BSA would be complete. Like the saying goes, “you can lead the horse to water, but you cannot make them drink”.
FINANCIAL SUPPORTING A BUY-SELL AGREEMENT
Although many options to fund the purchase commitment can be written in a BSA. Common options contain the use of personal funds, generating a sinking fund within the business, having access to borrow funds, as well as insurance and repayment plans. With these options, insured options can only assure total financing of the asset from the start. Having a proper Buy-Sell Agreement will contain disability buy-out insurance as well as life insurance. Do to the owner of the business health is the factor on being insured, postponing in obtaining fitting coverage can jeopardize the success of the Buy-Sell-Agreement right along with the success as well as the continued existence of the business’s future.