Family Business

Houston Families Should Take Note of Pending IRS Changes

Published on: August 20, 2015 | By McCulloch & Miller, PLLC

The word is out in the estate planning bar that the IRS is looking at making an announcement this September about a favorite tax benefit gained from the use of family partnerships and LLCs. New regulations would effectively raise the taxable value of assets transferred into these entities, which currently enjoy a generous discount. Wealthy clients are being advised to set up partnerships now to capture what remains of these discounts before the new rules take effect.

According an article in Barron’s titled “IRS Considers New Tax on Wealthy Families,” any changes to tax benefits affection family partnerships and LLCs could have significant consequences.

The article explains that partnerships and LLCs currently let families pass on a minority stake in the family business or in a pool of privately-held investments to their children with little or no tax consequences. This is because minority shares in a private business are illiquid, or unable to be easily sold or exchanged for cash without a substantial loss in value. They are worth less, from a tax perspective, than their stated market value. This is a big help to families who want to lower the taxable value of their assets, and in some cases below the $5.43 million gift-tax exemption. It also works even if the underlying investments getting passed on are liquid. The discount could be as much as 20% to 25%.

Houston Business Owners May Combat Values During Sale

Published on: March 26, 2014 | By McCulloch & Miller, PLLC

The buyers and the sellers couldn’t agree on how much the company was worth.

A business is essentially an asset, but assigning a value to this type of asset tends to be very complex. If your retirement plan (and maybe your estate plan for your heirs) relies upon the business, do you know what your business is truly worth?

For a sobering problem many business owners end up facing when it comes to valuing their business, be sure to read a recent article in Forbes titled “Is Your Business Worth As Much As You Think? Many Aren't.”

Houston Families Can Plan A Family Business Legacy

Published on: March 6, 2014 | By McCulloch & Miller, PLLC

These two experiences taught me a lesson about family businesses. Making a family business a family legacy takes planning and preparation. While each family business has its own unique issues, there are some common strategies associated with succession planning.

Sometimes, passing along your assets to the next generation is simply a matter of passing them along. You just let the gift and the potential represented by that gift be your legacy (emphasis on the “sometimes”). However, when the asset is a business, it is rarely that simple.

A business is not merely a thing. No, a business is a mindset, an activity and, oftentimes, even a lifestyle. It can get complicated. If your legacy is the family business, then with great responsibility comes the need for equally careful planning, preparation and dialogue.

Houston: Family Wealth And Financial Entropy

Published on: March 3, 2014 | By McCulloch & Miller, PLLC

The numbers also show that roughly one in three businesses pass to the next generation. Just about 10% of family businesses pass to the grandchildren’s generation. Still fewer make it to the subsequent generation. Regardless of the reasons, family money seems to move away from that which created it. Among wealth advisors, there is a saying: the first generation makes it, the second generation spends it, and the third generation blows it.

Family wealth created through a family business can be a wonderful blessing for a family. The trick is keeping it through the generations. Far too few families make proper plans to keep the family business going between generations. That is where the real work needs to be done.

Only the big family names (think “Rockefeller”) lead us to believe that family wealth is perpetual. In reality, family wealth left unchecked has a tendency to follow the laws of entropy as it devolves into chaos and greater and greater breakdown or division. This phenomenon, along with some constructive advice, is featured in a two-part Forbes article titled “How The Wealthiest Families Make And Lose Their Money.”

Passing The Torch – Five Succession Tips for Houston Businesses

Published on: January 3, 2014 | By McCulloch & Miller, PLLC

To ensure your exit goals are met and your family relationships remain intact, it's important to clarify the family succession process right from the start.

When you are a family business owner looking to pass the torch, the business is typically your greatest asset and likely the center of the family's wellbeing. You cannot afford to mess this up.

Succession planning is unique because business is business, and so a successful succession is a careful one.

Prep Your Houston Business Sale With These 10 Tips

Published on: December 18, 2013 | By McCulloch & Miller, PLLC

An estimated 70% of businesses don’t have a family member capable or willing to assume responsibility. What are you doing to plan for the sale?

A certain reality will eventually set in when it comes to the future of your business. And that reality is that some day you are not going to be there to run it. It is just a matter of time, and there may simply be no family member there to step up to the task, which is something even further from your control. For many a business, and for the betterment of the family, this means a sale. So what are you doing to prepare the business for sale?

Your Houston Business Exit: By Design Or By Default?

Published on: November 18, 2013 | By McCulloch & Miller, PLLC

What will be the most likely exit scenario from your business when the time comes?

If you own a small business, what will your last day at work be like? What is your exit strategy? The answer hinges on whether your exit will be by design or by default.

To exit your business by design requires coordinating your personal estate with the estate of the business. Oftentimes the two are intertwined. Ask yourself the question recently posed in the title of a recent Forbes article: “How Will You Leave Your Small Business The Last Time?”