Sooner or later, you’re going to start thinking about handing over the reins of the business to the younger generation. Typically, you might arrange to sell shares of company stock to the successors you anoint, or simply give the stock to them. But that could cost a steep tax price.
Strategy: Set up a stock bonus plan. As the name implies, your company issues stock to your successors as bonuses for work performed for the company.
If you handle things right, this can be a tax-favored way to transfer full or partial ownership of the company. For one thing, you avoid paying capital gains tax on the sale of your shares. Currently, the maximum federal tax rate on long-term gains is 15% (20% for certain upper-income taxpayers). For another, you won’t erode any part of the unified estate and gift tax credit available for assets ($5.25 million in 2013). Unlike a straight gift of stock, there are no gift tax concerns with a stock b...(register to read more)