Preserving Value of an Interest in a Closely Held Business
by THOMAS W. HUDSON, JR. Partner, Atlanta Office
Presented before the Florida Estate Planning Council, Miami—February 1963
SINCE the end of World War II, many business enterprises have experienced phenomenal growth. It has not been unusual to see such growth manifested in a business enterprise owned by one man, or a man and his family. Often a business started with a small original
investment has grown until, today, it has substantial value— maybe $100,000, $500,000 or $1,000,000, or perhaps much more. Other substantial business enterprises may have been owned and managed by the same family for several generations.
Regardless of the origin or age of the enterprise, where the value of an interest in a closely held business enterprise constitutes the major asset of the owner, some difficult—sometimes frustrating— estate planning problems arise. The scope of these problems is reflected
by some basic questions:
• How and what does the owner wish to provide for his family?
• What will be the source of cash for payment of estate taxes
and administration expense?
• Who will run the business after the owner's death?
The value of the interest in the enterprise may continue to increase.
While this increase in value may be a tribute to good management
aided by favorable economic conditions, it also tends to magnify the problem of meeting cash requirements of the owner's estate. Yet the failure to make adequate plans to meet these requirements
could force the executors to dispose of the business interest of the deceased owner, possibly under unfavorable conditions, thereby defeating the wishes of the testator.
The owner of a closely held business is occupied constantly with the daily problems of business management. Frequently, his active management and guidance is the key to the continued growth and success of the business. Nevertheless, if an individual expects to continue owning and managing a business until the time of his death, and if that business is the principal asset of his estate, he must realistically seek an answer to the question of what will happen to his business and who will run it after his death. Failure to plan for the orderly succession of capable management can lead to the dissipation