Taking Stock of the Family Business

Source: AICPA CPA Insider

In this article, Heidi Bolger offers guidance on advising family businesses on ownership allocation. Highlights include:

Strongly encourage family business clients not to provide ownership to family members who aren't active in the business. Identify other options for sharing the wealth.
Limit ownership to family members who are vital to the business's ongoing success.
Except for entrepreneurial startups, contributions to the business are rarely equal. Providing the CEO with voting control empowers him or her to lead and promotes the future success of the business.
For larger businesses, CEO ownership control is less important, provided the CEO has the power to lead and has input from an executive committee or board made up of active family members. Key decisions should require support by at least two-thirds of the owners.
Consider structuring stock ownership so no children have a controlling interest and parents retain a “swing vote” for a period of time.
Have a well-designed buy-sell agreement.

From AICPA CPA Insider, April 2, 2012, http://www.CPA2biz.com.