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Shares in Family Business Can Be Challenging

Posted by Nina Whitehurst | Dec 21, 2017 | 0 Comments

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Value of shares in a private company can more easily be lost because of the time factor.

Shares in most public companies can be sold quickly and easily.  However, if you leave your heirs shares in a family business, it can be more difficult because money can more easily be lost, according to the Wills, Trusts & Estates Prof Blogin "The Family-Shareholder Wealth Roadmap."

If heirs receive shares in publicly traded companies it is easy enough for them to turn those shares into cash anytime they wish.

If you leave your family shares in a private or family business, it is much more difficult to turn those shares into cash. There are often restrictions on who can own the shares and there is not an easily and quickly accessible market to sell the shares.

One of the biggest mistakes that family businesses make, is not adequately considering the time value of money when it comes to making cash distributions to shareholders.

Companies often wait too long to make the distributions and thus the shareholders lose value. Another common mistake is using equity to finance operations, when debt financing would be better under the circumstances.

These problems can be overcome with the right assistance.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include assets in the form of a family business.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 24, 2017) "The Family-Shareholder Wealth Roadmap."

About the Author

Nina Whitehurst

Attorney at Law Nina has been practicing law for over 30 years in the areas of estate planning, real estate and business law She is currently licensed in Alaska, Arizona, California, Colorado, Oregon and Tennessee. Her Martindale-Hubbell attorney rating is the highest achievable: 5 stars in peer...

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