■ Family Business
Continued From Page 8
Compiled by John Joseph Parker
Contributing Editor
I
n this special report, accountants, bankers
and lawyers offer financial, legal and manage-
ment best practices for New Jersey-based fami-
ly businesses—keys to success for this generation
and the next. The nuances and dynamics of
steering a family business in the right direction
can be best implemented early in the life cycle of
the company, where short-term and long-term
planning can map out the future—including a
succession plan. Here is a roadmap of insights
and advice for these unique enterprises for which
success or failure is all or mostly “relative(s)”
ACCOUNTING
CohnReznick LLP
By A George Sparacio, CPA,
Partner, Tax Practice
CohnReznick assisted a family
business that was owned and
directed by parents passing their
company on to the next gener-
ation. The value of the business was about to
potentially escalate due to the pending launch
of a new product line, so the older generation
was wary of a potentially large estate tax issue.
To remedy this, we advised the business owners
to create a defective grantor trust. The trust ben-
eficiaries from the second generation were chil-
dren working in the business and the parents’
goal was to pass the company to them later.
The parents sold a large portion of the com-
pany stock to the trust. Because the trust was
defective (disregarded for income tax purposes),
there was no gain on the sale. For estate plan-
ning purposes, the bulk of the company value
was removed from the estate and future com-
pany growth value was passed on to the next
generation tax free. We continue to advise the
second generation of business owners and will
be setting up something similar so they can pass
on assets to their next generation.
EisnerAmper LLP
By Lisë Stewart,
Principal-in-Charge,
Center for Family
Business Excellence
Recently, Tom, the patriarch
in a family-owned business, ex-
plained that he and his wife had built a success-
ful company over the past 25 years and now all
three of their adult children are involved. “I love
my kids, and they love and care about each other,
but there is no way that they can work together!”
The siblings all have strong personalities and
very different visions for the business—particu-
larly in their particular departments. Over two
productive meetings, we helped Tom to devel-
op a completely new organizational structure,
consisting of a central office and three separate
limited liability companies (LLCs) operated by
each family member. This new structure meets
the needs of both the family and the business
and will enable the siblings to work toward their
strengths, the family to maintain its harmony
and the business to continue thriving
Ernst & Young LLP
By Sean M. Aylward,
Managing Director,
Family Enterprise
Business Services
A second-generation family-
owned, custom process equip-
ment manufacturer was experiencing several
years of stagnant growth. The client contacted
EY’s Family Enterprise Business Services (FEBS)
team to discuss potential external growth op-
portunities. We helped the client complete a
go-to-market assessment, including a compre-
hensive review of sales and marketing activities,
current revenue channels and profitability, cus-
tomer relationships and the client’s direct com-
petition. Our assessment revealed that the client
had ample opportunity for organic growth.
After extensive market research, our FEBS team
was able to quantify and prioritize the client’s
target markets, including identifying new in-
dustry segments for the client to pursue. This
ultimately led to the development of indus-
try-specific target customer databases and the
identification of roughly 3,200 potential new
customers. With a new-found focus on organ-
ic growth, the client’s business increased by 39
percent over the first two years, which resulted
in a 43,000-square-foot expansion project to
meet the additional capacity requirements.
Marcum LLP
By Daniel Roche,
CPA/ABV, ASA,
Advisory Partner,
National Business Valuation
Service Line Leader.
Marcum’s Advisory group has
a long history of assisting family-owned busi-
nesses both in business valuation and dispute
resolution. One recent Marcum client was a
family-owned construction company, where an
older generation of shareholders was trying to
structure a deal enabling the younger generation
to buy them out. Unfortunately, family dynam-
ics were contentious, and litigation was threat-
ened. Marcum was engaged to fairly value the
business and assist our client in structuring a
settlement that allowed them to realize full value
for their shares while preserving the business for
the next generation. We were able to meet the
May 2020 COMMERCE 9