The Family Business Bulletin

INFORMATION – Business Counseling

Starting a Business in Mississippi

by Dr. Jim Chrisman

COFER Director and Julia Bennett Rouse Endowed Professor of Management

Based on responses to a recent survey, approximately 61% of clients planning to start a business who received five or more hours of counseling from the Mississippi Small Business Development Center (SBDC) in 2022 started a business by the end of 2023. During the same period the start-up rate among SBDC clients in the U.S. in general was 57%. The numbers suggest that the SBDC program can be a valuable resource for entrepreneurs who want to start a family enterprise.

INFORMATION – Business Tax Trends

Expiration of Tax Cuts and Jobs Act

by Dr. Jim Chrisman

Family business owners in Mississippi should be aware that the Federal Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025.

The TCJA was signed into law in December 2017 and represented a significant change to the U.S. tax code. Its primary goals were to reduce the tax burden on individuals and businesses, stimulate economic growth and make U.S. businesses more competitive internationally. The Act changed laws governing tax rates, deductions, depreciation, expensing, tax credits and other tax items that affect businesses, self-employed individuals and employees. The most important provisions included:

1. The corporate tax rate was reduced to a flat 21%.
2. Businesses were allowed to immediately expense or deduct 100% of the cost of certain capital investments instead of depreciating them over several years.
3. The Corporate Alternative Minimum Tax was eliminated.
4. A 20% deduction on qualified business income for pass-through businesses, such as sole proprietorships, partnerships, LLCs and S-corporations was implemented.
5. It provided a reduction in tax rates and the widening of tax brackets, changing both in the favor of taxpayers.

For more in-depth information visit Tax Cuts and Jobs Act or IRS.

As leadership in Washington transitions in 2025, the future of the Tax Cuts and Jobs Act (TCJA) remains uncertain. Family business owners have the opportunity to share their perspectives on how tax policies affect their businesses and communities. To facilitate this, the House Ways and Means Committee has created a comment portal where stakeholders can provide input on the potential impact of tax changes.

How to submit comments to the tax teams:

• Family business owners, managers and other stakeholders wishing to submit comments can email [email protected].
• The Committee instructions specify to include “Tax Teams Comment on [name of relevant Tax Team(s)]” in the subject line or body of the email.
• Attach your written submission as a Word document, or include your comments in the body of the email.
• Be sure to provide a contact name and phone number or email address.
• For questions or technical assistance: Call 202-225-3625.

2. Define the goals and strategy for the business and family. Before deciding how the succession process should be carried out, figure out what you want the business to become and how a new leader will help it get there. You should also decide what role the family will play and what you want them to get out of the business.

3. Determine who will select the successor. The successor can be selected by the principal owner-manager(s), by all key members of the business or by all the members of the family. There is no answer that is right or wrong, but the answer should be well communicated.

4. Determine selection criteria. It is important to decide how the successor will be selected. Research suggests that the types of skills needed will vary but that integrity and commitment are the most important characteristics regardless of the business.

5. Train the successor. Education and on-the-job training are important. Deciding if a successor should move around to different parts of the business or get deep training in the most important function is important. Determining the proper mix of internal and external training is also vital.

6. Prepare a role for the incumbent. The incumbent can destroy the successor or ruin the business if not fully committed to the succession. Figuring out a retirement plan and post-succession role for the incumbent is just as necessary as training the successor.

7. Timing and satisfaction are key. The incumbent and successor must be well-prepared, but it may be even more important that the incumbent is satisfied with the successor and vice versa. Succession is about people and profits. Each must be taken into account, or both will ultimately be lost.
 

Chrisman, J.J., Chua, J.H., Sharma, P., & Yoder, T.R. (2009). What CPAs should know about guiding family firms through the succession process. The CPA Journal, 79(6), 48-51.