When you think of family businesses you may picture your local coffee, diner or specialty retail store, but the scope of family businesses is far more expansive.
In fact, more than 32 million family-owned businesses in the United States employ nearly 60 percent of the private sector workforce and generate almost 54 percent of the GDP, according to Family Enterprise USA, a Washington, D.C.-based advocacy firm.
Interestingly the statistics around success of family businesses paint a picture of the potential impact of family dynamics. Some data show that only 30 percent of family businesses make it to a second generation, 10-15 percent to a third generation, while the numbers continue the downward trend from there.
All in the Family
“For companies to remain successful through an ownership transition, planning conversations need to happen early and often,” says Bryan Koepp, Wealth Planning Executive at Regions. “If everyone involved in a future succession isn’t on board, that can spell disaster.”
Koepp pointed out that having contingencies in place, locking in on valuation and preparing for the event are part of the ongoing discussions he and his team have with business owners even if they are decades away from implementing a succession plan.
“Our team has seen family businesses fall apart when an older generation owner either is ready to retire or passes away because, while it may have been assumed that the next generation was going to take over, it turns out that individual has other plans,” says Koepp. “There are also times when spousal owners aren’t in agreement over plans for the next generation to take the reins.”
The latter scenario can occur when one spouse feels too much risk involved in business ownership or that the younger generation is not capable of successfully running the business. This is why strategic planning is imperative when looking at a future for a family-owned company because there may be alternative routes for business succession that would better suit the family members’ unique personal, professional and financial goals.
You Can’t Time the Market
Koepp recalled a late-night comedy sketch with a character called Future Man, who extolled the practice of buying low and selling high. In other words, timing the market. And most of the time, market timers lose.
“We encourage clients to adopt the same mindset as with investment management,” noted Koepp. “It is a process, and you cannot time the market.”
The COVID-19 pandemic is an example of events that can really upend plans.
“There were businesses on the verge of unbelievable breakthroughs that suddenly needed Payment Protection Plan loans,” said Koepp. “It was a game-changer in terms of the market timing theory.
Business Succession: It Starts with a Vision
Koepp suggested that it is key for business owners to define their own objectives and work with their banking team to build the plan and process.
“Our process begins with the relationship with our clients as we work together in building a succession plan that is discovery and goal-based,” Koepp noted. “It starts with: What is your vision and what do you want to do?”
Working with business owners of all sizes often involves a multi-disciplinary approach and holistic relationship teams. That can look like collaboration with bankers from Wealth Management, Commercial Banking, Corporate Banking and even Regions’ Branch Small Business depending on the business size.
Time Is of the Essence
One important aspect Koepp points out is the looming expiration of the Tax Cuts and Jobs Act of 2017. It’s set to sunset at the end of 2025.
“Possibly the largest impact of expiration of this act is the reduction in the gift and estate tax exemption, the amount that taxpayers may gift or use at death to transfer assets without transfer tax assessed,” says Koepp.
Currently an individual can transfer $13,610,000 of wealth without being subject to gift and estate tax (at a 40 percent tax rate). At the end of 2025, it is estimated the federal estate and gift tax exemption will reset to approximately pre-TCJA levels adjusted for inflation. This value is projected to be in the $7,000,000 range per taxpayer.
Business owners may leverage their federal gift and estate tax exemption to transfer business interests to their next generation without out-of-pocket tax ramifications. Before use, Koepp highly recommends that a business owner has an accredited valuation and discussion with their legal and tax counsel, in conjunction with the wealth management advisory team, to implement the best strategy possible.
With proper planning and guidance, business owners have a better chance of leaving a lasting legacy.
For more information and resources from Private Wealth Management, visit Regions Wealth Insights.
© 2025 Regions Bank, Member FDIC. This information is general in nature and is not intended to be accounting, legal, tax, investment or financial advice. Although Regions believes this information to be accurate, it cannot ensure that it will remain up to date. Statements of individuals are their own—not Regions’. Consult an appropriate professional concerning your specific situation and irs.gov for current tax rules. The information should not be construed as a recommendation of a specific course of action for any individual or business.