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2010 is a Prime Opportunity for Family Business Succession

Posted by Jamie Downey  May 20, 2010 10:16 AM

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Ninety percent of the 21 million US businesses are family owned. Yet only thirty percent of family run companies today succeed into the second generation, and only 15 percent survive into the third (Source The reason for this significant failure is obvious; these businesses lack an orderly succession plan.

Family run businesses have struggled through the recent recession. For many, sales and cash flows have declined. The inability of many small businesses to get adequate bank financing has exacerbated the problem. However, some families businesses are taking advantage of this recession by executing their succession plan.

There are several reasons that the recession is a prime time to execute your succession plan. They are as follows:

Business valuations are low – A business generating less income is worth less money. The reduction in value makes it much more tax efficient to move these assets out of one’s estate and into the hands of the next generation. Just a few years ago the same transfer may have cost the business owner a significant amount of taxes.

Commercial real estate valuations are low - If your business also owns real estate, these assets also have likely declined in value. If this is the case, this may be a good time to transfer these assets to your heirs.

Tax rates are low – The maximum capital gains rate is 15% in 2010. This rate is increasing to 20% in 2011. With the federal government operating a $1.6 trillion deficit, do not expect rates to be this low anytime in the next generation. You may consider taking advantage of this now.

There are many strategies and techniques used to execute a succession plan. If you are in need of developing a succession plan for your family business, please see the following “Business Succession – A Ten Step Checklist”.

Business owners are obviously distracted by economic issues, but please do not miss out on this opportunity to align you business for the future and to reduce your taxable estate. If you have any questions, please submit them on the bottom right side of this webpage.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of, a credit card and gift card marketplace, and, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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