planning ahead

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Closely-held businesses often rely heavily on a small group of key employees to help their businesses succeed.   Given the value of these key employees to the business, it is not uncommon for the business to offer them certain types of additional executive compensation, in addition to standard base salary and participation in typical employee welfare…

Ask most closely-held business owners what words come to mind when they hear the names “Enron” and “Worldcom” and many would say things like “bankruptcy,” “failure,” “scandal” and “greed.”    Ask those same business owners what impact those two names had on the ways they are able compensate their key employees and most would likely say…

In a previous post, we noted that individual shareholders often seek to reduce the double income taxation (at both the corporate and shareholder levels) that accompanies a sale of assets by, and liquidation of, a C corporation by arguing that they own personal goodwill.  By claiming goodwill as a business asset that is separate…

Transactions between a closely held business and its owners will generally be subject to heightened scrutiny by a taxing authority, and the labels attached to such transactions by the parties have limited significance unless they are supported by objective evidence. Thus, arrangements that purport to provide for the payment of compensation, dividends, rent, interest, etc.,…

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…

         Over nearly three decades, I have reviewed the income tax returns of many closely held corporations and partnerships.  Quite often, on Schedule L (the Balance Sheet), I will see an entry for “loan from” shareholder or partner, as the case may be.  I sometimes pause before asking the next series of questions:  did the board…

“Call it what you want, incentives are what get people to work harder.”  — Nikita Kruschev

Most of our clients are closely held, often family-owned businesses.  The current owners may be the founders of the business, or they may be a generation or two removed.  Sometimes, the owners have children who are active in…