Inter vivos transfers of ownership in family firms

Hines, James R.; Potrafke, Niklas; Riem, Marina; Schinke, Christoph

doi:10.1007/s10797-018-9508-1

Cited by 5 publications

(5 citation statements)

References 68 publications

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“…Overwhelmingly, it is in the best interest of business owners to transfer their business to heirs before their death, as taxes can quickly accumulate and cut into the amount of assets being transferred (Giarmarco, 2012;Hines et al, 2018). Inter vivos gifting of the family business is just one way to enable ownership transfer as it can help to avoid taxes and penalties associated with inheritance (Hines et al, 2018), but such giving requires strict planning and confidence in the next generation. According to Vozikis et al (2012), the tax burden can be minimized for successors by using life insurance on incumbents of family businesses.…”

Section: Discussionmentioning

confidence: 99%

“…A survey of roughly 1,700 German family firms found that transfer of ownership was easier for family firms who were more successful (Hines et al , 2018); most likely because more resources were available for planning and structuring the business for such a transfer. Hines et al (2018) found that ownership transfer occurred more frequently when market conditions were favorable. Under favorable market conditions, more assets were available to accommodate and fund the transfer.…”

Section: Literature Reviewmentioning

confidence: 99%

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Management and ownership transfer in small and medium family farms

Wiatt

Marshall

Musselman

2022

AFR

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PurposeThis study investigated the succession process in small and medium family farms as two distinct but related processes of management transfer and ownership transfer. Past studies focused on the broad subject of succession, without dissecting succession into the components that it contains. Furthermore, this study aimed to evaluate which business, family and owner characteristics were significant in the progress of each process toward the actual transfer of management and ownership.Design/methodology/approachTelephone interviews were conducted to gather information from rural family businesses in Illinois, Indiana, Michigan and Ohio. A bivariate ordered probit regression was utilized to model the processes of management and ownership transfer as separate but related processes. Both management transfer and ownership transfer were modeled utilizing three distinct stages of transfer.FindingsBusiness and owner characteristics were significant to both management and ownership transfer, whereas family characteristics only influenced ownership transfer. Farm family businesses that discussed goals, identified a successor and were educated on how to start the transfer process were more likely to have made progress in both management and ownership transfer.Originality/valueThe authors contribute empirically to the literature by modeling the components of the succession process, management transfer and ownership transfer, as separate but interrelated processes. The authors specifically investigate which business, owner and family characteristics influence the progression of management and ownership transfer in farm family businesses.

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Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Management and ownership transfer in small and medium family farms

Wiatt

Marshall

Musselman

2022

AFR

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“…The regulation of family business, including the associated tax issues, is a broadly discussed issue (see, for instance, Hines et al, 2019;Chen et al, 2010;Shin, 2020;Steijvers and Niskanen, 2011;Vincencova et al, 2015). This fact stems from the social relevance of this type of business: family crafts and family business corporations are major employers and producers (Mandl, 2008).…”

Section: Discussion -Evaluation Of the Current De Lege Lata Legislati...mentioning

confidence: 99%

“…At the same time, a number of studies demonstrate that family businesses are more sensitive to the risk of agency costs, loss of reputation and thus less willing to apply a more aggressive approach to tax optimization (Chen, 2010). The thesis that family businesses in good economic conditions exhibit a higher rate of inter vivos transfer has been confirmed in some studies (for instance see Hines, 2019), with this phenomenon being significantly determined by related tax considerations.…”

Section: Selected Aspects Of the Operation And Transfer Of A Family B...mentioning

confidence: 95%

Specifics of Family Business from Tax Law Perspective with Emphasis on Selected Aspects of Intergenerational Succession – a Case of the Czech Republic

Brychta¹

2022

R. Econ. and Finan.

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Compared to standard business activities, a family business shows significant specific features derived, among others, from the connection of family members, family life and business activities. At the same time, these entities are traditionally described to be the backbone for the economies being more resistant to unfavourable conditions. In the Czech Republic the family businesses deserve extra attention now because of the first intergenerational succession that is currently taking place. This paper, which is an exploratory study in its nature, aims to identify and systematize the existing rules regulating family business (family crafts and family business corporations), with an emphasis put on the standards regulating family business succession. Key substantive tax acts, procedural rules as contained in the Tax Procedure Code, basic accounting regulation rules and regulation in the area of social and health insurance premiums were under investigation in this respect. The results of the conducted research prove that the Czech law-making body has not established a preferential tax regime for entities meeting the characteristics of a family business as currently defined in the Governmental Resolution of the Czech Republic. Some preferential clauses for family business as such can be, however, found in the Income Tax Act, which increasingly operates with family ties as one of the criteria for achieving certain tax benefits. In the context of the focus and the results presented therein, this paper can be seen and used as a basis for further research in the area of family business, focusing on the transition/transfer of a family business from the perspective of relevant private and public law rules.

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“…In other words, bequest motives drive short-term present economic decisions to be influenced by long-term future utility expectations. Bequest motives are also recognized by existing literature to exert influence on the current managerial behavior and future succession decisions of family businesses Ravikumar, 2001, 2004;Caselli and Gennaioli, 2013;Hines Jr, Potrafke, Riem, and Schinke, 2019). This stems from the most defining objective of family firms relative to non-family firms, i.e., the promotion of business wealth and influence of family members and future generations (Chua, Chrisman, and Sharma, 1999;Burkart, Panunzi, and Shleifer, 2003;Bennedsen, Perez-Gonzalez, and Wolfenzon, 2010).…”

Section: Introductionmentioning

confidence: 97%