A big primary reason for many in starting a family business is the ability to make charitable donations. Many philanthropic organizations begin with entrepreneurs who want to improve their community.
That doesn’t mean that every family brand has the capability to invest in others. It’s best to determine what you can offer that doesn’t feel detrimental. Part of family business consulting is determining how your organization can give back. Read on to learn how Positively People can assist your firm with a variety of practical solutions.
Include Estate Plans in Continuity Planning
Due to the recession in 2008, many family businesses saw a spike in owner reinvestments. Since they could transfer cash without many penalties, the entire estate could enhance its value. Unfortunately, that also opened up many companies to additional taxes. Today, firms can still lose a lot of cash when making these types of transfers, even when it’s avoidable.
Family business succession planning should include ways of minimizing tax penalties when shuffling resources around. Otherwise, you could quickly see higher fines, fees, and tax brackets, which you want to avoid.
Focus on Legacy Planning for Your Family Business
In years past, families would launch charitable programs after the founder passed away. While that is a nice gesture, it often ends up where the larger vision takes root. Instead, more family businesses are reinvesting in the community they love. They take a much more proactive approach, ensuring their vision is fulfilled.
Surviving family governance members can try and make educated decisions regarding philanthropy. However, it’s also much more direct if the leader can share their wealth now.
Reroute Taxable Income Towards Philanthropy
After you’ve exhausted your lifetime gift exemptions, it feels like your wealth has disappeared. If most of it goes towards estate taxes, it’s evaporating your liquidity. Giving to charity doesn’t always have to be in the form of a gift. You could use that same cash as a type of private loan.
Doing so shields that money from the government while improving your chosen cause. It’s a win-win, allowing for more wealth to go towards your company’s heirs.
Instill Philanthropy in Family Business Leaders
Another advantage of philanthropy is that it sets precedence for future leaders. Rather than waiting to donate in memoriam, older members can share their passions now. Even if family members don’t join the company, they’ll still have common goals. This helps them understand which causes to champion and why they are important.
Family business succession should include instructions about different charities and if they align with the firm’s goals and causes. This can lead to a more fulfilling experience and a marked improvement for their cause.
Direct Your Family Business Towards Shared Goals
A primary reason for hiring family business advisory services is because of shared goals. These objectives should not only offer tax relief but improve upon a particular cause. Unfortunately, it isn’t always clear how your firm should pursue these efforts. The best way to support your family business is with our advisors.
We work with many companies with family dynamics at play. Choose the best advisors for your firm with Positively People. Contact us today for a consultation.
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