A strong succession plan will center not only around grooming heirs to take on key business functions, but also around estate tax planning. The current estate tax law allows individuals to avoid taxes on estates valued at no more than $5.25 million, or $10.5 million for spouses who file jointly. In addition, the gift tax enables individuals and business owners to gift up to $14,000 – or $28,000 for joint filers – to as many individuals as they wish. Keeping these two exemptions in mind, business owners may have more leeway when it comes to establishing a succession plan that keeps their tax liability low.
The first step is to hire an appraiser to conduct a business valuation. When business owners don’t know the true value of their assets, tax planning becomes more challenging and their estates may be forced to pay out more in taxes than the company head intended. Once the true value is determined, owners can make more informed decisions about managing their affairs. As an example, businesses that are high in value will undoubtedly be subject to more taxes, and owners can avoid this scenario by gifting assets to successors to reduce their taxable estate.
Gifts can be made in the form of real estate, cash, investments, and other business property on a tax-free basis. This method can also be particularly impactful if owners plan to have several successors, as it allows them to transfer larger chunks of their business to heirs. In addition to gifting, owners might also consider setting up a trust for successors that enables them to manage or monitor certain business functions and investments and provide guidance to beneficiaries.
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Tariff Response Options for Small Businesses Facing Financial Distress
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
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