Year End Tax Strategy: Give Away Your Business, Part 2

In my last blog, I wrote about how some business owners are dramatically increasing their giving. They are doing so by giving away part of their business interest.

There are several benefits. Because they are lowering their overall tax bill, they have more to give. In addition, the stock, if it is declaring distributions, has the ability to fund their giving on an ongoing basis. We find as well that many business owners seek to monetize that gift as quickly as possible. That gift may be monetized by (a) having the company buy the interest back, (b) selling to family members or key employees, or (c) a third party sale. Obviously, once the interest monetizes, there is even more to give.

On the other hand, the business owner needs to realize that the process of gifting such an interest has some requirements. Typically, the business should have little debt, and of course should be profitable. It should have no outstanding claims, litigation or liens. To donate the interest, an appraisal will be needed of the business.

Likewise, to donate the interest, there are documents to be collected. Often a review of bylaws, shareholder agreements, and financial statements will be necessary. Each of these must be reviewed to make sure there is nothing which prohibits the deduction.

While the process may seem difficult, the significant opportunity for giving is worth it. We seen business owners whose giving power will literally go up ten times. The power of being able to give out one’s net worth just seems to prompt more giving.

William High is the President/General Counsel of the Servant Christian Community Foundation. Servant’s mission is to inspire, teach and facilitate revolutionary biblical generosity. He may be reached at whigh@servantchristian.com.

Advertisements
Posted in For Advisors, For Givers. Tags: , , , , . Comments Off on Year End Tax Strategy: Give Away Your Business, Part 2
%d bloggers like this: