Business Valuations and Estate Planning

Estate planning is possibly the most neglected, but arguably the most important aspect of family-owned businesses.

Estate planning sets up the transfer of an individual’s property to designated beneficiaries to minimize or possibly eliminate the taxes levied by the U.S. Unified Gift and Estate Tax Program. Without estate planning, the tax liability of the business can be so oppressive that the only choice the inheritor has is to sell off all of the company’s assets and either soldier on without them, or shutter the business and walk away.

A periodic valuation of the business can help the owner and family members better understand the nature of the estate tax concerns. The valuation can also provide a guide the business owner can use to set up ownership transfers, and can provide a basis for the valuation of gifts. More importantly, it can guard against future conflicts with the IRS.

Business succession planning is just as important as estate planning to the future of a business. Making business succession plans (determining which family member or combination of family members will carry on the business) requires careful thought that will often cause the business owner to reconsider his original position on who will carry on the operations once he is gone or no longer able to maintain the leadership role.

By: Present Value

Tags: Business Valuation, estate planning

This entry was posted on Thursday, July 9th, 2009 at 7:39 pm and is filed under Business Valuation, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.