It is not uncommon these days to see family-owned businesses with two classes of stock. Typically, one class has both voting and economic rights; the other class has only economic rights. With this structure, a couple of things are possible. For one, this structure can facilitate a gradual transfer of the business to a new generation. The senior generation … Continue Reading
Seattle has passed an employee hours tax, commonly referred to as a “head tax,” which takes effect in 2019. Most are aware that the tax affects corporations, LLCs and LLPs with annual revenues in excess of $20 million “engaging in business activities” within Seattle. (Exempted from the ordinance are nonprofits and certain industries in which tax… Continue Reading
The trademark laws of the United States provide businesses with significant advantages in protecting their brands, even without perfecting those rights with the state or federal governments. This is because the United States trademark law confers trademark rights based on use in commerce, meaning in many situations unregistered rights can be used as e… Continue Reading
Family businesses are fraught with challenges, but those challenges need not overshadow the benefits of maintaining a strong and successful family business. According to the Wright sisters, owners of an event production, design, and management firm in Los Angeles, there are a few important tips to consider when starting a family business.
First and for… Continue Reading
Most family business owners might live their entire lives without running into securities law issues or problems. Many probably believe that there is an automatic exemption applicable to a family business from the registration and antifraud requirements under the federal and state securities laws, which are designed to protect investors.
Well, it’… Continue Reading
A thoughtful shareholders’ agreement can be one of the most valuable tools a family business has. It can serve several purposes. A few of the easy ones are:
Restrictions on Transfer. A shareholders’ agreement—or similar document—can place appropriate restrictions on transferring shares, particularly transfers outside of the family. It can d… Continue Reading
Ross Henry, a client advisor at Laird Norton Wealth Management, recently published an excellent article entitled “Succession Planning is a Process, Not a Project.”*
While noting how critical succession planning is to a family and its business, and how easy it is to put the process off, Ross identified the three main components of succession planning… Continue Reading
Congratulations to our client Joshua Green Corporation on being nominated for the 2017 Family Business Legacy Award by Seattle Business Magazine. Davis Wright has had the honor of representing the Joshua Green Corporation for over 25 years.
Joshua Green Corporation had its beginnings in Washington State in the 1890s. It was actively involved in the fo… Continue Reading
At this point, no one knows exactly how or when changes to federal income tax, gift tax and/or estate tax will occur. What we do know now is that what has been proposed so far is likely not going to be the final product. So, stay tuned, but do not stop or delay your succession planning efforts. Instead, focus on your long-term vision and build flexibility into your … Continue Reading
Running a family business can from time to time strain family relationships. This is especially true between siblings who may feel as if they are in constant competition to determine who is worthy enough to take over the family business. However, a sibling relationship does not have to be strained so long as siblings work together to foster a respectfu… Continue Reading
Michael Eisner, former CEO of Walt Disney, said it best that “management is not a science, it is an art.” But, not all art stands the test of time—and the composition of the board, and the way the directors manage a family owned business may very well determine whether that business even exists in the next 10 years.
The masterpiece that can be a family owne… Continue Reading
Business buyouts are red hot, and pricing is back up to where it was before the Great Recession, thanks to cheap financing and a stronger U.S. economy. The fact is that this market won’t last forever.
Feeling the pressure to exit? That’s understandable, especially if you’re presented with what looks like an incredible deal. But we suggest you t… Continue Reading
The award-winning TV sitcom Arrested Development, now in re-runs on Netflix, was premised on the rise (and mostly fall) of an American family business, the Bluth Company, owned by a comically dysfunctional family.
Engaged in “mini-mansion” real estate development in Newport Beach, California (and, illegally, Iraq) the Bluth Company fell on hard t… Continue Reading
A typical family-run ranch or farm may look like this: grandparents still own and collect rent on the majority of land, parents serve as CEOs, and the third generation works the land as general managers while raising the upcoming progeny at the homestead. All of these positions fit the respective generations’ needs and status right now, but a family busin… Continue Reading
Recently we published a post in our blog about succession and the steps necessary to see it through. Having an open, honest, and transparent discourse with family members is one such step. Yet, this is often more easily said than done. A recent study conducted by Wilmington Trust on families with a net worth in excess of $20 million found that many leaders of we… Continue Reading
Every article, paper, memo, or advisory about family business succession touches on some common themes. Plan early. Communicate well. Document the process. Gauge the true interest and ability of the next generation.
A few weeks ago, the New York Times ran an article about succession in family businesses that indirectly hit on a theme that is less develope… Continue Reading
Family-owned businesses that have independent board members are frequently among the best-managed and best-governed. They have reached a level of maturity where family members recognize that outside voices provide stability, objectivity and protection from certain business risks.
Let’s define what “independent” means for our purpose… Continue Reading
Let’s face it. “Governance” often seems like a dirty word that is best avoided and never uttered. But, all family-owned businesses must be governed and the governance process is usually already in place, albeit often ignored.
This is a missed opportunity. Ignoring the governance process creates huge challenges for succession planning and … Continue Reading
It’s important to remember that when your family business sets compensation for family members, the IRS may be looking over your shoulders. Why? The IRS may disallow the deductibility of salaries and other compensation if it determines that the compensation is higher than “reasonable.” The family business discussed in this article by Mich… Continue Reading
Family-owned businesses are often formed as LLCs. For federal tax purposes, an LLC with two or more members is treated as a partnership unless it elects otherwise. Income earned by a partnership is not subject to a separate entity-level tax under federal tax laws. Rather, net profit or net loss of the partnership passes through to its partners who mus… Continue Reading
Typically, only 12% of family businesses reach the third generation, and as little as 3% make it past the fourth generation. According to PwC’s recent global survey of over 2,800 family businesses in 50 countries, these statistics stem from a lack of succession planning.
Only 15% of family firms have adopted a meaningful plan for their succession proces… Continue Reading
Talking about business over family meals is not the same as having a family business governance plan. The most successful family businesses adopt a level of formality above and beyond occasional family gatherings.
For up-and-coming family members who anticipate becoming leaders in their family business, an increasingly common requirement is that they first get meaningful business experience outside the family business. Michael A. Klein of MK Insights recently published an interesting analysis of such requirements in Smart Business Online, and lays out goo… Continue Reading
Big family business conglomerates can get into big trouble when impacted by negative global market forces. That’s the story of Hanjin Shipping Co., a family-owned Korean shipping company (and part of a large Korean chaebol, or conglomerate) that filed for bankruptcy protection in late August 2016.