Chapter 20
Estate Planning and Gifting
In This Chapter
Planning for unexpected family problems
Creating succession and estate plans
Getting expert help when you need it
Working with buy/sell agreements
Setting up a gifting strategy
When a company plans for any kind of ownership transition, business valuation needs to be part of the process. If the company is changing hands between strangers or nonfamily members, both sides have a certain idea of value that they want to confirm before the negotiation starts. Settling on a price only after a thoughtful and thorough analysis of what the company is actually worth makes sense.
Surprisingly often, however, valuation is neglected when a business asset is passed down within a family. Often, a patriarch builds a company from scratch, runs it his way, and expects family members to take the operation blithely into its second and third generations without giving any thought to the real value — or possible lack of value — of what he’s built. The owner’s perception of value may not match his children’s perceptions or the perception of the marketplace. This lack of objectivity — or at least reluctance to bring in an objective expert to value the business — causes many businesses to shut down or go up for sale before they make it to the next generation.
If a founder is passing down his company to his kids, both sides — the founder and the heirs — are wise if they insist on an independent and early valuation process to get an idea not only of ...
