Starting A Business? Plan To Succeed
Published Tuesday, Oct. 20, 2020; 10:30 PM EST
(Tuesday, Oct. 20, 2020; 10:30 PM EST) In America's capitalist system, an economic cycle entails destruction of businesses and their replacement with better businesses. It's survival-of-the-fittest, a process in which the ranks of businesses are periodically thinned by recessions.
The Covid recession, early evidence suggests, is leading to a boom in entrepreneurialism. "The pandemic has had all sorts of unexpected consequences, from a boom in sourdough-bread baking to more people listening to nostalgic music on Spotify," according to The Economist, (October 10, 2020). "Less noticed is a once-in-a-generation surge in startups."
So here's an important strategic tax tip for anyone who just started a business or who's about to do so: Plan now to transfer your ownership to your family.
To be clear, your new business may succeed! Capitalism is dynamic which keeps the American dream alive. Businesses that failed in the Covid crisis are going to spawn the launch of businesses that will succeed and ride the wave of growth in the next economic cycle. If you plan to succeed, and, if your business does indeed boom in the next economic cycle, it is wise to plan now to transfer assets to your children, charities, and what's important to you. You can set up your company tax-efficiently right now to minimize taxes many years from now for your heirs.
The U.S. debt has skyrocketed and estate taxes are expected to be higher in the years ahead. Planning for success of a new business and minimizing taxes on its transfer to the next generation could result in considerable tax savings, especially in the event of a Democratic sweep on November 3. A victory by Democrats is expected to slash the amount of estate assets exempt from estate tax from $11.58 million to $5.75 million, or lower. By forming the company and managing the selection of shareholders with this in mind from the time of initial formation of your company, you will have more control over the tax-efficient transfer of your business if it's successful.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial or tax situation, or particular needs. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. The material represents an assessment of financial, economic and tax law at a specific point in time and is not a guarantee of future results.
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