Hartford Business Journal

18 HARTFORDBUSINESS.COM | AUGUST 10, 2026 FOCUS | Private Companies EXPERT'S CORNER Will your children really want the family business? By Alison G. Cosgrove M any business owners have envisioned, and likely assume, their business will pass on to their children one day. It feels natural to pass the torch to the next generation after decades of hard work, family sacrifice and financial success. However, sometimes life unfolds differently than expected. Perhaps there is a shift in desire from the founder to transfer their business to their children, or the children develop career passions elsewhere. In some cases, a child has grown into an adult who is unfit to run the business. Sometimes there are multiple siblings with varying degrees of abilities or interest. For business owners, it is important to have these conversations and plan accordingly. The family business isn't always the dream job Just because the business is valu- able and has been successful doesn't mean a founder's children want to run it. Passions and careers may have developed in different industries. Or the next generation may have planted roots in a different geographical location. A judgment-free dialogue about whether a founder's children want to participate in the business should happen early on. This not only allows time for leadership development but exploration of alternate successors if family succession is not the right fit. Fair is not always equal Imagine a scenario with two siblings. One has devoted years to honing their craft and learning the business, while the other has pursued an entirely different career. Should they both inherit equal shares of the business? Splitting ownership down the middle may feel fair, but it can saddle the committed sibling with a co-owner who has no role in the day-to-day business and leave the uninvolved sibling with an asset they neither understand nor want. Life insurance can be a useful tool in this case. If one child is inheriting the business, a policy on the owner's life can "equalize" the child who isn't involved. The active child receives the company; the other receives insur- ance proceeds of comparable value, in cash, with no entanglement in the business. This avoids forcing the successor to buy out a sibling and gives the non-interested child liquidity instead of an illiquid minority stake. The goal is an arrangement each child considers fair, which requires talking about it openly rather than leaving it to be discovered in an estate plan. Start planning before it becomes urgent Succession works best as a process, which may include leader- ship development years ahead of any transition, so the next generation earns credibility with employees, customers and lenders. It may involve incremental steps like a gradual handoff of responsi- bility such as letting a successor run a division, manage a banking relation- ship or lead a major project before taking the reins. Governance structures such as an advisory board or a family council can streamline difficult decisions and give non-family executives a voice. And if an honest assessment reveals no willing or able successor, planning early leaves time to prepare the business for a potential sale on your terms. Legacy is bigger than ownership Sometimes preserving a legacy does not require preserving family ownership. A sale to employees through an employee stock owner- ship plan or a management buyout rewards the people who helped build the company and keeps it rooted in the community. A strategic buyer may bring the capital and scale to grow the busi- ness further while retaining its name, jobs and culture. Sale proceeds can fund charitable giving that carries the family's values forward for genera- tions. Legacy, in other words, can mean your life's work thriving after you're gone, whoever holds the stock. Ask yourself: Have you explicitly discussed the future of your company with your children? If the answer is no, that conversation is the logical next step. Alison G. Cosgrove is a senior wealth planner based in the Ston- ington office of Bradley, Foster & Sargent. EXPERT'S CORNER Does your business structure still match your goals? By Eliot Bassin A n important, and sometimes overlooked, aspect of tax planning is selecting the appropriate entity structure for a busi- ness. While non-tax considerations often play a part, the right structure may make the business more tax efficient or provide long-term tax benefits. Business owners tend to confront the analysis at two points: when starting the company, and years later, after the business has evolved and plans have shifted, when the question becomes whether a reorganization or tax election would provide benefits not contemplated at founding. Getting it right at the start At founding, the right structure usually comes down to two ques- tions. How will you fund the busi- ness? And are you building it to keep, or building it to sell? First, consider funding. Many businesses lose money in their early years. If you're covering those losses out of your own pocket, some structures let those losses flow through to your personal tax return, where they can offset income you earn elsewhere. In effect, the tax code shares in your startup costs. An LLC is often the vehicle for this. Now consider the exit. If you're building the company to sell it (and you can hold it for at least five years before that), some or all of your gain from the sale can be excluded from tax entirely. That benefit is generally available only to businesses orga- nized as C corporations. And if you plan to own and operate the business for the long haul, an S corporation enables the owners to take the qualified business income deduction (QBID), which was intro- duced in the 2017 Tax Cuts and Jobs Act legislation. S corporation profits, unlike partnership profits, are not subject to self-employment taxes. While these factors may seem straightforward at the outset of the business, things can change over time. When businesses evolve in a direction that clashes with their entity structure, there are usually options. When the business or the plan changes Sometimes, owners who set up a C corporation because they expected to sell decide they're keeping the business after all. A C corporation's profits can effec- tively be taxed twice — once at the company level and again when paid out to owners. For a business that's now a long-term hold, converting to a different structure can eliminate that second layer of tax. However, the tax rules include a waiting period after such a conver- sion. Sell the business's assets too soon — within five years — and you lose the benefit. Raising capital is another frequent trigger. A company that planned to self-fund may be looking to raise outside capital and the potential investors may have strong prefer- ences about structure. S corporations come with rigid limits, including caps on the number of owners and the types of owner- ship they can offer. The solution may be reorganizing entirely, or building a new subsidiary structure that lets investors come in on terms they'll accept. Similarly, founders who chose an S corporation, then wanted to grant ownership stakes to key employees, often discover the structure is too inflexible to do it cleanly. The work- around is often creating a new entity underneath the company where employees can hold their stake while the founders keep their ownership in the original structure because unwinding it would trigger a tax bill. The lesson in each of these scenarios is the same: Your business structure is not a set-it-and-forget-it decision. It's a tool, and tools should match the job. Revisiting the question when your goals shift can be simple or complicated, but in most cases, the headaches of a transition are worth it to have a business structured around where you're actually going, not just where you started. Eliot Bassin is a partner at FML CPAs. He leads the firm's Avon office. Alison G. Cosgrove Eliot Bassin

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