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Caring For Generations

Selling a Business Has to Work on All Fronts

by | Nov 2, 2022 | Business Law, business planning, estate and tax planning, Estate Planning

After advising numerous entrepreneur clients over several decades, California wealth manager Andrew Palmer writes in Financial Advisor Magazine that he’s found that sometimes the most valuable decision is not to sell. To be sure, Palmer admits, there may be reasons to consider the sale of a business including:

  • high offer by a purchaser
  • to take retirement
  • liquidity needs
  • death
  • divorce

But does the sale make “life sense”? Palmer wants owners to think long and hard about that one, warning that the pressures of juggling the managing of a business with focusing on a sale can “fracture families, marriages, and partnerships”, ultimately tanking a deal. Is the entrepreneur emotionally ready to let the business go? How will the sale affect the client’s multi-generation wealth planning? “Because the identity of the family is often tied to the family business, a sale can represent the loss of status and heritage for family members”, the authors of a UBS paper, “Planning for the sale of a closely held business”, observe.

All very important considerations, we agree at. Geyer Law, where, since 1999, our attorneys have been helping entrepreneurs start businesses and plan for their succession. As is true with all important decisions in life, it’s crucial to begin with the end in mind. Yes, there are myriad decisions to be made in forming a new enterprise – choosing a business structure, finding a location, and securing financing and setting proper legal protections and insurance policies in place. At the same time, it’s crucial to ‘think ahead”, creating a succession plan (which might or might not involve a sale to outsiders, family members, or employees).

Not only does the sale of a business involve complex tax issues, the complexity of many estate planning decisions is undoubtedly increased when shares in a family business are involved. How important is it to protect children’s inheritance from their creditors or from negatively influenced decision-making? How will owners’ charitable gifting be impacted? How will sale or retention of the business impact healthcare financing?

As Nerdwallet so appropriately sums up the situation, proper business estate planning accomplishes two things, ensuring that someone you trust takes over your business when you can no longer be (or no longer want to be) present, and simplifies things for your loved ones if you pass away prematurely or become disabled.

In planning to buy, form, or sell a business, at Geyer Law, we know the most important thing is to always begin with the end in mind.

– by Cara Chittendon, Associate Attorney with Rebecca W. Geyer & Associates