Three Tactics to Transfer Your Family Business

Estate planning is crucial for the owners of a family business, as failing to prepare could result in the determent of the company. If you have not already drafted an estate plan that discusses the succession of your business, you need to do so today. The early planning will allow you to slowly implement your plan for the future of the business, and you can also make sure that your family's main source of income is protected.

One way to transfer your family business is to sell the company outright to an interested buyer. If you want to keep the business within the family, then you can to so buy actually selling your business to your children through your interest. This is a great idea for those that need income from the business, such as a retiree. If you decide to sell your business, you will need to sell it at its fair market value. If you don't do this, then you may trigger gift taxes which could cost a lot of money.

You can also use a buy-sell agreement to work with business owners who have selected the person that they would like to transfer the business to, but who are not ready to hand over the reins. In a buy sell agreement, a business owner has the ability to specify that the designated successor will be required to purchase his or her interest in the business. Normally trigger events are thing like incapacity, retirement, or death.

As a business owner, you can also make a transfer through a living trust agreement. In order to do this, the business owner will need to transfer the business to the trust and then name an intended successor as the successor trustee to the trust. This will allow the owner to run the business as normal, but then transfer to the trustee at the time that he or she passes. Discuss these options with a probate attorney today if you want to learn more!