Client Login
 

(703) 992-9570  

plan@makonnenfg.com

Home NavigationMENU
  • Who We Are 
    • Our Firm
    • Meet the Team
    • Our Mission and Philosophy
    • Why MFG and LPL Financial
    • Strategic Resources
  • The Planning Process 
    • What We Do
    • The Planning Process
    • Forms & Planning Documents
  • Events
  • Resources 
    • Retirement
    • Estate
    • Investment
    • Tax
    • Money
    • Lifestyle
    • Glossary
    • Tax Resources
  • WealthVision
  • Contact
Estate Read Time: 3 min

Succeeding at Business Succession

According to the Conway Center for Family Business, family businesses account for 64% of the U.S. Gross Domestic Product (GDP), yet 57% of family businesses have no formal succession plan.1 While the number may shock you, it is not surprising that many small business owners are consumed by the myriad responsibilities of running their businesses.

Nevertheless, owners ignore succession preparations at their peril and possibly at the peril of their heirs.

There are a number of reasons for business owners to consider a business succession structure sooner rather than later. Let's take a look at two of them.

The first reason is taxes. Upon the owner’s death, estate taxes may be due, and a proactive strategy may help to better manage them.² Failure to properly prepare can also lead to a loss of control over the final disposition of the company.

Second, the absence of a succession structure may result in a decline in the value of the business in the event of the owner’s death or an unexpected disability.

The process of business succession is comprised of three basic steps:

  1. Identify your goals: When you know your objectives, it becomes easier to develop a plan to pursue them. For instance, do you want future income from the business for you and your spouse? What level of involvement do you want in the business? Do you want to create a legacy for your family or a charity? What are the values that you want to ensure, perhaps as they relate to your employees or community?
  2. Determine steps to pursue your objectives: There are a number of tools to help you follow the goals you’ve identified. They may include buy/sell agreements, gifting shares, establishing a variety of trusts, or even creating an employee stock ownership plan if your desire is that employees have an ownership stake in the future.
  3. Implement the strategy: The execution step converts ideas into action. Once it's implemented, you should revisit the strategy regularly to make sure it remains relevant in the face of changing circumstances, such as divorce, changes in business profitability, or the death of a stakeholder.

Keep in mind that a fundamental prerequisite to business succession is valuing your business.

As you might imagine, business succession is a complicated exercise that involves a complex set of tax rules and regulations. Before moving forward with a succession, consider working with legal and tax professionals who are familiar with the process.

1. Conway Center for Family Business, 2019
2. Typically, estate taxes are due nine months after the date of death. And estate taxes are paid in cash. In addition to estate taxes, there may be a variety of other costs, including probate, final expenses, and administration fees.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

 

Related Content

Social Security Benefits: How Much Will I Receive

Social Security Benefits: How Much Will I Receive

Calculating your potential Social Security benefit is a three-step process.

When Should You Take Social Security

When Should You Take Social Security

Monthly Social Security payments differ substantially depending on when you start receiving benefits.

What’s Your Investment IQ?

What’s Your Investment IQ?

You make decisions for your portfolio, but how much do you really know about the products you buy? Try this quiz

 

Have A Question About This Topic?









Thank you! Oops!
 

Get Financial News & Updates Delivered to Your Inbox





Thank you!

Error processing your request. Please try again at a later time.

Check the background of your financial professional on FINRA's BrokerCheck.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

We take protecting your data and privacy very seriously. As of January 1, 2020 the California Consumer Privacy Act (CCPA) suggests the following link as an extra measure to safeguard your data: Do not sell my personal information.

Copyright 2023 FMG Suite.


The LPL Financial registered representative(s) associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Securities and Advisory services offered through LPL Financial, a registered investment advisor. Member FINRA & SIPC.

Registered as IAR in the following states: TX and VA.

Contact

Makonnen Financial Group, LLC
Office: 703-992-9570
Toll-Free: 800-877-7210
Fax: 703-992-9945

5568 General Washington Drive
Suite A-200
Alexandria, VA 22312

plan@makonnenfg.com

Facebook Twitter LinkedIn

Quick Links

  • Retirement
  • Investment
  • Estate
  • Tax
  • Money
  • Lifestyle
  • All Articles
  • All Videos
  • All Calculators
  • All Presentations