Miscalculations and Entitlement Traps? What exactly is a “Legacy Payment”? Legacy Payments are those payments made to the prior generation when the next generation buys a family business. These payments include the debt service, principal and interest, on the purchase of the family business and possibly the real estate too; in addition, there are other types of Legacy Payments that can add weight to the tot ...

Don't Lose This Important Group of Clients The majority of children who inherit money don't retain their parents' advisers.  Joe Sicchitano, from SunTrust Bank, discusses how advisers and clients can take several steps to avoid this outcome, such as proactively communicating and working early to establish a relationship. To read the full article in FinancialPlanning, click: Advisers to Clients: Don’t Hide t ...

Advising Your Business-Owner Clients on Transitions As baby boomer entrepreneurs move toward retirement, their advisers should ask a series of questions about their financial and emotional states to help them plan their exit strategies.  Patricia M. Annino, JD, suggests, among other things, advisers should ask about how quickly clients want to sell, how the sale will affect their families, and whether they ...

The IRS is Challenging the Appropriateness of Discounts when Preparing a Valuation The current regulations, Revenue-Ruling 93-12, allow for discounts when valuing a Family Limited Partnership (FLP). The proposal is expected to potentially limit the allowed discount and consequently raise the taxable portion of the trust or estate structures. This article reviews the current requirements for FLPs, their hist ...

Plus: Rulings on Family Business Share Value in Oklahoma, Expert Witnessing in New Hampshire The California Appeals Court rules on whether a vineyard’s expectations for future profits for land taken in eminent domain proceedings was a reasonable extrapolation in The People v. Dry Canyon Enterprises, LLC.  Click for more state case law on non-competition agreements, expert witnessing, and family business sha ...

Buyers and Sellers Need to Negotiate Delivery Targets for Working Capital and Agree on a Fair Market Value for Fixed Assets. Valuation principles generally hold that the value of a business is largely a function of return on invested capital and growth, writes Ron Stacey, since these are the primary drivers of free cash flow. But how does this cash flow relate to the asset and liability values on the balanc ...

Few Business Owners Seem to Even Know How to Make a Good Guess at What Their Business is Worth.  NY Times Introduces Technology to Help—and Certified Advisers Provide Extra Value.  Mark Cohen, at The New York Times Small Business Guide, reports:  "At 53, Joe Ritz is old enough to remember a time when many of the classic cars that now pull into his specialized repair shop were new. “It’s one field where it p ...

MidasFund Will Not Acquire Distressed Companies; However, it Will Buy Stable Divisions of Bankrupt Companies.  Here's Why.   "Last week’s announcement that MidasFund had started acquiring zombie companies caused a flurry of emails," writes Rob Slee on the MidasMoments blog of the MidasNation site.  "Many of you asked about the differences between acquiring distressed, zombie and healthy companies. Let’s dig ...

Ahead of the new health-care law, small firms worry about crossing the crucial 50-person threshold — and about rising premium rates  Emily Maltby at the WSJ Law blog reports on increasing concerns about the forthcoming healthcare laws among small business owners.  This seems to be a prominent issue and concern among small business owners, and has been noted in most every major media outlet in recent weeks, ...

Recommended Valuation Process for Buy-Sell Agreements: Single Appraiser Chris Mercer tells how to set up a Buy-Sell Agreement for closely held and family businesses. He identifies three key procedures: Owners should select an appraiser for their business when they create the Buy-Sell, that appraiser should offer an initial baseline valuation for the Buy-Sell, and the named appraiser should continue to value ...

Tips for Family Businesses to Survive and Thrive When Tough Times Hit Can You Revive Your Distressed Family Business?  The first step to figuring that out, Steven F. Agran explains, is an objective assessment of cost structure.  What determines whether a business can be cash flow positive at current sales levels or even at lower levels, if sales continue to decline?  Find out here. ...

When Do Too Many Active Shareholders Hurt Instead of Help? At Forbes, Lawrence Siff relates his conversations with CEOs of two family businesses, discusses the challenge of bringing in new leadership, and offers tips on how and when to go about it:  ...

A relatively unexplored area of family business research is the role that an active, independent board of directors can play in perpetuating the family business from one generation to the next.  David Thayne Liebell reports at Trusts & Estates that a  recently published book, Building A Successful Family Business Board, seeks to close that research gap. In fact, according to the book’s authors, an activ ...

The Ten Biggest Family Businesses in the U.S. Business Insurance lists them: Wal-Mart Wal-Mart is the world's largest retailer and most successful family business of all time. In 1962, founder Sam Walton took his knowledge of discount retailing and opened the first Wal-Mart store in Rogers, Ark. It wasn't long before Sam expanded his business and opened up hundreds, then thousands of stores worldwide. After ...

Book Review:  Inside the Multi-Generational Family Business Family Business Review recently ran an interesting book review, by Jane Hilburt-Davis, of M.T. Green's book Inside the Multi-Generational Family Business: 9 Symptoms of Generational Stack-Up and How to Cure Them.  Writes Hilburt-Davis: Green introduces a new conceptual framework, the syndrome of “generational stack-up,” defining it as “the converge ...

Fraud and the Family Business: It’s Not So Unusual The dynamics of a family-owned business are like no other, writes Robert Rothbort at Accounting Today.   There's usually a great atmosphere of trust. But that can leave family businesses uniquely vulnerable to fraud.  Here are some common schemes: • “Ghost” employees. The family member overseeing payroll creates “ghost” employees that do not exist and arran ...