In this issue
Thinking of a shareholder transition can be daunting, since it deals with "retirement." Preparing one's estate is often put on the back burner until it is too late. But proper planning can make these transitions less onerous and more comfortable for all parties involved.
Transitioning ownership will affect the shareholders, the shareholders' children, the management team and the employees. The effects of a transition on these groups—and the effects these groups might have on a transition—should be carefully considered.
In the nearly 20 years since Sam Menaged opened the Renfrew Center, it has become the world's largest network of eating disorder treatment centers. Renfrew, founded in 1985 as a single residential treatment facility in Philadelphia, now has more than 500 employees at 14 locations in 12 states. The center gets its name from the 27-acre Renfrew Farm, its flagship location.
When the Affordable Care Act (ACA) went into effect in January 2013, it came with an unexpected consequence that family business shareholders are still scrambling to understand. The new 3.8% tax on earnings hits shareholders who are considered passive investors in S corporations—generally those who work fewer than 500 hours a year in the company. As many of our clients are discovering, the financial impact of the tax can quickly jump to the six figures and continue to increase as the company becomes more successful.
Best board practices were the focus of the second annual Private Company Governance Summit, presented jointly by Family Business and Directors & Boards magazines and held at the Dupont Circle Hotel in Washington, D.C., May 7-9. The conference drew about 150 participants, including owners and directors of family and other closely held businesses, stakeholders in private equity-owned companies, and advisers to privately owned businesses.
At Laboratory Testing Inc., an independent testing company in Hatfield, Pa., steel, iron and other materials get pushed, pulled, dropped, squeezed, stretched, smashed, dissolved and shattered.
As an experienced mediator, I believe that mediation should always be considered to remedy disputes. This is especially true when families are involved because mediation is less likely than litigation or continued animosity to destroy important relationships. In mediation, all parties have a voice at the table. In addition, because each individual is respected as the expert on his or her own particular situation, family members should be empowered to craft resolutions that work for them—which is what mediation is all about.
Bassetts Ice Cream, a fifth-generation business, is the only original establishment still operating in Philadelphia's historic Reading Terminal Market. "Location plays a key part in a business's success, but you still have to make it work," says Roger Bassett, 52, managing partner. "There are plenty of businesses that have failed here," says Bassett, who runs the retail store in the market, which is popular with locals and tourists alike.
Generation of family ownership: Third.
Revenues: $725 million (2013).
Years with the company: Fifty-two on the payroll and 47 as my full-time job. When I was a kid, my parents gave me a choice: Do chores at home or at the business. I chose the business. I also worked here full-time while in college.
First job at this company: Assembling boxes, cleaning and loading trucks.
At what age? Ten.
Wealth study reveals need for education
Wealthy people say they want to preserve their money for the long term, but most don't know how much they can afford to spend each year without risking depletion of their assets. So reports Merrill Lynch's Private Banking & Investment Group, which recently released a study of 171 U.S. consumers with $5 million or more in investable assets.