Transitioning a Family Business: Keep, Sell or Feud?

26.04.2017 | Sullivan & Worcester, Boston, MA

In this seminar, Jay Darby, Brian Hammell and panelists from Wells Fargo Private Bank addressed the distinctive issues that arise on the sale of a so-called “family business” – a business controlled by a single individual or a single family group. The program examined the key tax and business matters that arise when a family-owned business begins the process of transition. First and foremost, the senior family members must decide whether to sell to an unrelated party, whether to transfer management to the next generation within the family, or whether to bring in outside management and restrict family involvement to the board of directors and shareholder levels.

Practical experience shows that family business decisions are inevitably part of the larger family dynamic – the business creates wealth but triggers family dissension. The family seniors must have clear strategies and priorities on how to run the business, grow the business and ultimately transition the business.

This Tax Briefing provided practical strategies for managing these challenges, including:

  • How to bring family members into the business — and manage family rivalries
  • How to transition ownership and control (often different concepts) to younger generations, without triggering gift or estate tax problems, including under Code §§ 2036 and 2038
  • Clever uses of redemptions and stock options in family-owned S corporations, creative ideas for “profits interests” in an LLC and related strategies
  • Tax, business and estate planning for families with one family business and multiple children who have different levels of interest and participation in that business
  • Sophisticated family transition techniques, including GRATs, CLATs, ING trusts, and installments sales to defective grantor trusts
  • Basic tax strategies, including taxable versus tax-free sales, asset versus equity sales, earn-out arrangements, like-kind exchanges and other transactional arrangements

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