Case Study: Reducing Tax Burden for a Family-Owned Business

A family-owned business faced a substantial tax burden due to its complex corporate structure. Without a proactive tax strategy, the family risked unnecessary liabilities that could erode business value and limit future financial flexibility.

The family’s key concerns included:

• Minimizing estate and capital gains taxes.

• Reducing exposure to future tax liabilities.

• Maintaining financial security while preserving business ownership.

• Managing liquidity efficiently when paying taxes.

Interchange Capital Partners collaborated with the family and their advisors to implement tax-efficient strategies tailored to their goals.

Key steps included:

• Family limited partnership (FLP) units were gifted to Spousal Lifetime Access Trusts (SLATs) established for the spouses. This strategy removed assets from the taxable estate while maintaining financial security for the family. 

• Leveraged QSBS exemptions to allow for significant capital gains tax savings upon the future sale of the business.

• Structured a philanthropic giving strategy with a donor-advised fund that enabled the family to reduce taxable income while supporting charitable causes aligned with their values.

• Instead of using sale proceeds to pay federal taxes, Interchange structured a $23 million line of credit at a low interest rate. The family invested the retained cash, generating additional returns. At the same time, the interest expense was deducted, saving federal taxes.

The family reduced their tax liabilities, preserved more wealth within the business, and improved long-term financial flexibility. Thoughtful tax planning aligned their estate strategy with business continuity.

For personalized guidance on navigating tax complexities in your family business, contact Interchange Capital Partners.

Interchange Capital Partners, LLC is registered as an investment adviser with the Securities and Exchange Commission (SEC). This communication should not be deemed as an offer or solicitation to buy or sell any product. Interchange Capital Partners does not provide investment advice prior to entering into an investment management agreement. Interchange Capital Partners, LLC does not provide legal, tax or accounting advice. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.