Transferring the Family Business

Josh Motlong

Case Study

Transferring the Family Business

The Original Situation

  • Couple in their early 50’s and had 4 sons.
  • His father started a family business and ownership was passed to the client, his brother, two sisters, their spouses, and 7 members of the third generation.  Including the father there were 16 owners
  • The client and his brother were leading and operating the company, but they were grossly under compensated..
  • None of the client’s nieces or nephews were interested in running the family business and his sons were interested but still in college or high school.
  • company was filing as an S-Corp and had substantial income being reinvested.
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The Strategies

  • We had the client and his brother distribute excess retained earnings and convert to a C-Corp.
  • The company bought back the stock from all family members except the client, his brother, and their wives.
  • The company increased the client and his brother’s wages to a competitive level.
  • We developed a plan to bring the client’s sons into the business after spending time working in other industries and determined they wanted to work in the family business.
  • We utilized a self-funded buyout with a gift of stock to their sons and a Charitable Remainder Trust with the company purchasing and retiring the stock.
  • We utilized life insurance to equalize their sons’ inheritances if any decided not to be involved in the family business.
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The Results

Original Plan New Plan

Maximizing Family Value

Lifetime Income: Increased 42%

Lifetime Inheritance: Increased 640%

Post-Death Inheritance: Increased 52%

Minimize Taxes

Income Taxes: Decreased 51%

Capital Gains Taxes: Decreased 68%

Inheritance Taxes: Completely Eliminated

Optimize Giving

Lifetime Giving: Increased 527%

Total Giving: Increased 1000+%

Case studies are for informational and illustrative purposes only and not to be considered a guarantee of results.
Actual results will vary with each situation.