Many of us have encountered variations of the following scenario: a parent owns and operates a business; his kids are employed in the business; as the kids mature and become more comfortable and established in the business, some of them may want to assume greater managerial responsibility and to have a greater voice in the
Family Transfers, Part IV: Not Just Gifting
Our last post covered certain gifting techniques. Today, we will look at some non-gift approaches to transferring a parent’s interest in the family business to his or her children.
Sale
The most common means for transferring a business interest to someone is through a sale of the interest. Thus, it not unusual for a parent
Family Transfers, Part III: Choosing a Vehicle
“Blood may be thicker than water,” begins an advertisement in a recent edition of the NY Times Magazine, “but can it hold a business together?” The advertisement continues, “It’s a little-known fact that nearly 90% of U.S. businesses are family firms. All over America, people pour their heart and soul into building family companies.
Family Transfers, Part II: Gifts
In an earlier post, we noted that a parent who owns a business faces some difficult issues regarding the disposition of that business among his or her children. Among the options to be considered is a sale of the business, which would allow the parent to treat the children equally, inasmuch as each may
Prodigal Son Redux? Balancing the Family Business and Bequests to Your Children
“There was a man who had two sons; and the younger of them said to his father, ‘Father, give me the share of property that belongs to me,’ and he divided his land between them. Not many days later, the younger son gathered all he had. . .and squandered his property in loose living
Valuing a Family Investment Company? Proceed With Caution
One of the thorniest issues faced by the executor of an estate holding an interest in a closely- held business is the valuation of that interest. As if the preparation of the 
estate tax return was not daunting enough, the executor also has to determine the fair market value of the business interest. Although the
Spin-Offs, Split-Offs and Split-Ups: No IRS Ruling? No Problem.
In an earlier post, we discussed the issue of splitting up the family-owned corporation, on a tax-free basis, so as to enable siblings to go their separate ways.
PLR 117674-13
A recent IRS ruling considered the following situation: an S corporation (“Distributing”) had four equal shareholders, each of whom wanted to independently own and
Recapitalize With Care! (The IRS is Watching)
A recapitalization is an exchange between one corporation and its shareholders or security shareholders. It has been described as a “reshuffling of a capital structure within the framework of an existing corporation,” and it is one of the most common forms of reorganization encountered in the case of a closely-held business. Simple examples include the
Splitting Up The Family Partnership
In the choice of entity debate, the ability to divide the corporation’s business assets and activities into two or more separate corporations, owned by different shareholders, without incurring taxable gain, is often said to be one of the more significant advantages enjoyed by the corporate form of business. However, though the partnership provisions of the
Rolling Over the Parent’s Equity
It is not unusual for a parent to have successfully started and grown a business, only to find that his children either have no interest in continuing the business or are incapable of doing so. Prior to that moment of realization, however, Parent may have transferred equity in the business to his children, either as