There is no question, we are in one of the most difficult economies we have faced in decades with oil prices through the roof, rising steel prices, housing market collapse, inflation concerns, political uncertainty, and the list goes on. Surely I do not have to elaborate any further as your business is likely feeling the impact. A decline in profitability is almost never a good thing…that is, unless you are looking to transfer equity in your business to a family member. This indeed could be an opportunity of a lifetime!

One of my clients (let’s call him Jim) has been debating transferring equity in his business for approximately three years to two of his children who are active in his business. Jim is facing a significant estate tax bill which was one of the motivators for considering a stock transfer. Up until now, there have been numerous reasons why Jim has not pulled the trigger. However, Jim is not about to let this opportunity slip away. Jim happens to be the owner of a few automobile dealerships which have historically been very profitable. However, the past few years have been difficult to say the least as Jim’s business has been experiencing lower profits. In addition, Jim’s franchises happen to be part of the “Big 3 in Detroit” and, as you may know, they are experiencing financial challenges of their own, which will likely play a role in the ultimate valuation of the business. Thus, it is likely Jim will be able to transfer an ownership interest in his business to his children at a significant discount due to market conditions. And when the market rebounds and the business returns, Jim will have effectively removed assets from his taxable estate.

Will you seize the opportunity or let this potential opportunity pass you by? If you have family members in your business or you are looking to incentivize a very special key manager who has poured sweat equity into your business, now may be a good opportunity!


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