IDENTIFYING THE ALTERNATIVES 

 You and a son or daughter want to run the business 

 together. How do you shift assets and management 

 responsibilities to your child while your protecting 

 your own financial security? Different options exist 

 for a business which is adequate in size to support 

 two or more families versus a business which can 

 support only a single family. 



If the business cannot support two or more fami- 

 lies, several alternatives can be followed. First, the 

 parents may help the child 

 start a separate business. The 

 child may work in a joint ar- 

 rangement with the parents 

 until he or she has sufficient 

 management experience and 

 equity (in the form of ma- 

 chinery, equipment, etc.) to 

 start their own business. Sec- 

 ond, the child may remain in 

 a "holding pattern" until the 

 parents retire at which time 

 he or she takes over the 

 business. To provide suffi- 

 cient income during this 

 time,the child may need to 

 lease additional facilities and 

 enter into a joint arrange- 

 ment with the parent, or 

 work for another business. 

 When the parents retire, 

 the child commonly acquires 

 ownership of the personal 

 property and leases the busi- 

 ness real estate. A third op- 

 tion would be to expand 

 business size to meet the 

 income needs of all families. 

 Before taking this route, the 

 desire of all parties to run 

 a business together must be 

 well tested and the parents 

 must be certain not to 



jeopardize their financial 



position. 



If the business can 

 adequately provide for two or more families and ev- 

 eryone gets along well, a major concern will be the 

 means of shifting the business assets and manage- 

 ment role to the child such that he or she will 

 have sufficient equity and skills to control the busi- 

 ness when the parents retire or in the event of an 

 untimely death. The general partnership and corpo- 

 ration are two forms of business organizations often 

 used to aid in business transfers. 



In a general partnership agreement, the profits 

 are usually shared according to each partner's rela- 

 tive contributions of labor, management and capital. 

 During the initial stages of the family partnership, 

 the business may rent or lease the real property and 

 some machinery from the parents, allowing the jun- 

 ior partner (child) an equal significant or share of 



TIPS 



FROM TINA SAWTELLE 



Price is the leading factor in choosing 

 Christmas trees, but there are other rea- 

 sons retailers lose Christmas tree sales. 



• Parking is not available close to trees. 



• Trees are hard to see and get at. 



• There is no assistance in selection and 

 loading of trees. 



• Prices are not clear on each tree. 



• Type of tree wanted is unavailable. 



Turn a tent or other area into a "Winter 

 Wonderland" scene. Promote this to fami- 

 lies as a draw. Write a press release to lo- 

 cal papers. 



Have Christmas carols in your tree display 

 area. Creating the Christmas mood will 

 enhance your Christmas sales. Offer hot 

 cider or hot chocolate while customers are 

 browsing. 



Provide a delivery service for Christmas 

 trees for a fee. 



Tina Sawtelle, principal of Sawtelle Mar 

 keting Associates, consults with agricul- 

 tural 



retail businesses on marketing and mer- 

 chandising. For more information, call 

 her at (603) 659-8106- >» 



partnership profits. As the partnership purchases as- 

 sets, the junior partner's equity in the business 

 grows. As the child's interest in business property 

 increases, his or her share of partnership profits and 

 business equity grows. After the partnership is well 

 established, consideration needs to be given to the 

 transfer of real estate and business control. This 

 may be accomplished by offering the junior partner 

 an option to buy the property or through some 

 combination of gift-giving and sales. Provisions 



should be made for this dis- 

 solution of the partnership 

 when the senior partner 

 (parents) retires. The par- 

 ents' estate plans should 

 also insure that the child's 

 interests are protected. 



The corporation pro- 

 vides long-term business 

 continuity; however, corpo- 

 rate management procedures 

 are more formal and record- 

 keeping requirements are 

 greater compared to a part- 

 nership. Interest in a corpo- 

 ration is represented by 

 shares of stocks. Business 

 ownership is easily trans- 

 ferred through the sale, gift 

 or inheritance of stock 

 shares. Business control 

 technically resides with 

 those who own more than 

 50% of the stock. When 

 forming a corporation, give 

 careful consideration to 

 which property to place in 

 the corporation. Should real 

 estate be part of the corpo- 

 ration or simply rented by 

 the business? In addition, 

 you'll need to carefully con- 

 sider the type of corporation 



formed and the various 



stock options. 



When you begin the 

 process of transferring business ownership, remem- 

 ber to not only involve all family members con- 

 cerned, but also get advise from many different 

 planning professionals. In addition to discussing the 

 options with a knowledgeable attorney, review your 

 objectives and plans with your accountant, insur- 

 ance representative, trust officer and others. Every 

 family situation is different. Be wary of any person 

 who offers a single solution, 



Michael Sciabarrasi is Extension Specialist, 

 Agricultural Business Management, in the 

 Department of Resource Economics and 

 Development, UNH Cooperative Extension. 

 University of New Hampshire, Durham. 

 He can be reached at (603) 862-3234. ^ 



THE PlANTSMAN 



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