Business Owner Planning

Does your executive compensation program help you recruit, retain and reward your key employees?

If you decide to keep the business for your heirs, how will you pay estate costs, provide income for your spouse, and equalize the distribution between your heirs if some are active in the business and some are not?

About 90% of the roughly 21 million businesses in the United States are independently-owned, family-owned or family-controlled. Yet, family business experts concur that less than one-third of these family businesses will survive into the second generation, and about 12% will still be viable into the third generation. The reasons are varied, but include family conflict, failure to design a proper succession plan and high federal estate taxes. To avoid a similar fate, you need a plan.

We can help you structure and implement a plan to achieve your objectives in the following areas:

Business succession planning: There are three steps to business succession planning:

Select and adequately develop the next generation of management, regardless of whether you plan to sell or keep the business in the family;
Decide when and how to transfer your business; and
Minimize the impact of taxes so that your family, your company and employees are not at risk.

If you plan to transition ownership of the business to your heirs, you need to decide how you will pay estate costs, provide income for your spouse, and equalize distribution. If you have a buy-sell agreement in place already, it should be reviewed to ensure it doesn’t cause significant inequity between the owners’ families. If you don’t have an agreement in place, you may want to consider an agreement that allows you to maintain control over the business and enjoy built-in flexibility. Alternatively, if you decide to sell your business, you should establish its fair market value, find a buyer, and consider how you will ultimately invest the proceeds from the sale.

Executive compensation planning: Even if your business is running smoothly, you will remain competitive only if you can attract, retain, and reward the highest level of talent in your industry. One way to do so is to implement a custom-designed executive compensation program. Selectivity, individuality and flexibility are the hallmarks of these plans. For instance, you might want to consider offering high-performing key executives some type of ownership in the business or a way to make up for benefits "lost" due to qualified plan limitations.

Business owner planning is not a static event, but an ongoing process that, over time, can provide you with the ability to accomplish identified goals. The objective of transferring your business in the most tax-advantaged way is a good reason to develop a plan, but other issues exist that are equally important. Spousal support, equalization among children, early inheritance, guardianship and asset management are all examples of issues that we will address as part of your overall plan.