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Well, when you have a closely owned business, the key to be thinking about is, what is your exit strategy? Is your exit strategy that you are going to leave the business to your children or other family members, your spouse? Or is your exit strategy that you’re going to sell the business to somebody? The answer to that question is going to determine to a significant extent what you should be thinking about.
Now if you’re thinking about leaving it to your family members, well the questions you might consider are, is there anybody in the family who’s even capable of taking over the business? Do you have a number of people and are there going to end up being fights among them? Are they going to be able to get along? Are your children ready to take over the business. For some people, their business is such a large part of what they have that the problem becomes, if I give the business to child one, what do I have left to give to child two? So that could be a real issue too.
Now one of the nice things in Pennsylvania is that if you have a business that’s owned by you or you and your close family members and you leave it only to close family members and they hold onto it for seven years, then that business is going to completely avoid Pennsylvania inheritance tax. So leaving it to your family can be a real tax benefit. But of course it only works if you’ve got family members who are capable of taking over the business.
If the idea is you are going to sell the business, then the considerations are somewhat different. You’ve got to consider, is the business actually ready to be sold? Does it have everything in place that’s needed to make it attractive? What’s your business worth and how are you going to determine that valuation? Who are the logical buyers for the business? Is it a key employee? Might even be your competitors or just some third party who would be interested in the business. And then what happens if you die prematurely? Will your spouse or your children know how to go about selling the business? How to market it? Who the key potential buyers are? So there’s a lot of things to be considered, if you’ve got your own business, in terms of succession.
Philadelphia, PA estates & probate lawyer Marc H. Jaffe explains the do’s and don’ts of business succession planning.