Does Your Business Succession Plan Involve a Holding Company?

MB900423021[1]Business succession plans take agreat deal of thought, as there are several ways to plan for transferring afamily business. How do you know which plan is right for you? Let’s exploresome important considerations.

Businesses exist on paper. Lotsof it.

Stationary letterhead, marketingmaterials, and the accounting books are the papers that may come to mind first.Nevertheless, don’t forget the all-too-often ignored “company books!” Theyprovide the foundation and the structure of the business itself.

Considering the form andstructure of the business can be vitally important when planning to give thebusiness to the next generation. In addition, you should be mindful of itscurrent operations and even the value of the business.

None other than The New York Times took up this issue ina recent article titled “Modern Safeguards for a Family-OwnedBusiness.” The article offers an excellent introduction to thetime-honored idea of a holding company. In short, a family can own a company byowning the company that owns that very company. Did you follow that?

Said another way, whileprofessional management can take care of the day-to-day operations of thebusiness, the owning family can come together to exercise control over thehigher entity – the holding company.

If you’re no stranger tocorporate structuring, then this is a familiar idea. Regardless, you never mayhave considered its application in terms of your own business and the familyownership.

For many, this kind of structuring can be a first stepin an overall succession plan for the business without finalizing the preciseterms of the succession. Be sure to call us for a consultation, asthis is not a do-it-yourself project.

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