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
S Corps: Not Gone Yet
It has become relatively rare for an accountant or attorney to recommend the use of an S corporation for a newly-formed, closely held business. Instead, the LLC, taxable as a partnership, has become the entity of choice for most start-ups, and for good reason: it is a flow-through entity for income tax purposes, and it
New York Business, the Federal Tax Return, and New York Domicile
We all know a story like Bill’s: Bill is a New Yorker that has built a successful business and has attained a level of financial security. His kids are grown, and have moved to the West Coast.
Bill decides that it is time to enjoy the fruits of his labor, preferably in a warmer climate.
(Un)reasonable Compensation: When Hindsight Isn’t 20/20
In the recent case Thousand Oaks Residential Care Home I, Inc. v. Commissioner, the Tax Court considered whether a corporation’s compensation packages for its owner-employees were unreasonable and thus disallowable as deductions. The facts can be summarized as follows: in 1973, Petitioners “Mr. and Mrs. F.” purchased a struggling corporation called Thousand Oaks Residential
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
Retiring A Partner: Gone, But Not Forgotten
The withdrawal of a partner from a partnership is one of the most common business transactions. In some cases, the partner leaves amicably; in other cases, the departure may occur after many disagreements and, perhaps, litigation. Regardless of the cause of the partner’s withdrawal, it is often the case that neither the partner nor the