For many Americans, owning a family business is the pinnacle of entrepreneurial success. Family business owners often enjoy the benefit of sharing the experience of growing the company with their loved ones. Another benefit of owning a family business is that successful owners can rest assured that the fruits of their labor will continue to provide for their families even after death or separation.
This is especially true for family business owners who wish to transfer their businesses onto their children. If this is your plan, then you should know that there may be income, gift and estate tax consequences for handing over the reins of your company.
That is why the formation of a trust can often prove beneficial. Careful estate planning can help you reduce your tax liabilities while also allowing you to relinquish only the amount of control of your business that feels most comfortable to you.
For example, one form of transferring your family business might involve establishing a buy-sell agreement with your children. Under this type of agreement, you would sell your interest of your business to your children, yet retain control over it in the event of certain circumstances.
Essentially, these buy-sell agreements are contracts that specifies what will happen in the event of your retirement, divorce, disabling injury or death. One example might be that your children will be bound to buy your interest in the business from you after one of those events have been triggered. Furthermore, you can also specify the terms of the sale of your company to your children as well as the price.
Of course, the buy-sell strategy is only one form of estate planning that could potentially reduce your overall tax liabilities. Careful estate planning can be tailored to suit your specific individual needs. Based in Rochester, our law firm has over 50 years of combined legal experience providing clients with personalized services.
Prospective clients are encouraged to contact us and schedule a free initial consultation with one of our attorneys. We represent clients in upstate New York, Western New York and throughout the Finger Lakes Region cities.