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As the Baby Boomers become Seniors, many successful family business owners are contemplating passing the businesses created by a lifetime of hard work down to the next generation. However, while it may be an important vision for those who have become successful to allow their next of kin to take over the reigns, the majority of family business do not survive the transition. There are many reasons why it is difficult to transfer a company to relatives. This article explores some of these issues.

Perhaps the most important conern of a business owner is the tax consequence which follows the transfer of a business upon the retirement or death of the owner. In the past, the Unified Tax Credit allowed business owners to pass up to $600,000.00 tax free to their offspring. There have been recent changes in the tax code which will gradually raise the tax free cap to $1,000,000.00 by the year 2006. However, those who give gifts or inheritances of over this amount must suffer the sting of a 37% tax rate, which gradually climbs through brackets until it caps at 55% for amounts over $3 million. Most businesses worth over $10 million do not have the over $5 million in liquid assets required in taxes at the time transfer takes place. It may be wise to consult with a CPA or estate planning lawyer to set up proper legal planning to insure that the transfer will not bankrupt the business.

Another important issue is the reality that family dynamics play an important role in the transfer of a business to relatives. Feuds among relatives for control of the business can cause internal anguish that undermines the ability of the company to function and creates rifts and loyalty problems for owners, employees and customers. Perhaps the most important thing a successful business owner can do in his or her lifetime is to attempt to treat family members fairly and spend time training children so that they have the proper tools, loyalty and attitude to keep the business alive.

Every business is different, and the solutions for the ownership to transfer in one company may not work in another. There are many steps that can be taken to attempt to make a smooth transition. These may include setting up trusts and partnerships, making gifts of up to $10,000 per year tax free, deferring taxes, and even selling the business if required. Before any of these steps are taken, it may be wise to speak with an attorney and/or a CPA or other tax planner to determine the best way to effectuate your wishes as to how assets should be distributed before or after you die.

It may be wise to consult with an attorney about issues concerning the passing of family owned businesses to relatives. The law office of Pradell and Associates provides low cost legal consultations. A helpful staff provides prompt, courteous services to meet your legal needs. Give Pradell and Associates a call today, at (907) 279-4529-- (279-4LAW). This article is not intended to provide legal advice and should not be relied on for that purpose.