March 16, 2015

If you feel overwhelmed or confused by the process of business succession planning, you’re not alone. In fact, this is a common challenge facing many of America’s business owners. To further complicate matters, many business owners are not informed about the possible tax implications of a succession plan they choose. This is why it’s so important to choose a business succession advisor who is familiar with the implications for both your business and your tax situation. 

One common mistake made in the process of business succession planning is to sell all or a portion of the stock to your children. This can have negative tax consequences that you didn’t realize when you put the plan into place. For example, if you use a stock purchase agreement or a stock redemption agreement that required insurance on the owner’s life in order to provide company stock to someone else, the IRS could collect estate taxes on that amount if you don’t structure everything with details in mind. While life insurance can be an important part of your overall estate planning, it might not be the most appropriate vehicle to pass on company stock to your children. A trust or other business succession planning strategy may be more aligned with your business needs while also taking into account the tax implications of such an action.

The bottom line is that you need a business succession planning advisor who is familiar with creating a comprehensive strategy aligned to your needs. Contact us today to learn more at info@lawesq.net.