Business Succession Planning

Business owners have a particularly intricate financial situation, and need guidance in deciding whether to keep or sell their interest at death, disability or retirement. Whatever you decide, you need the ability to take advantage of high-level strategies to retain your business' value for you and your family. You should also evaluate the tax consequences of your options with a tax professional and get help to reduce their impact at the time of transfer.

There are three steps to business succession planning:

  • Select and adequately develop the next generation of management, regardless of whether you plan to sell or keep the business in the family.

  • Decide when and how to transfer your business.

  • Mitigate the impact of taxes so that your family, company, and employees may have their risks reduced.

If you plan to transition ownership of the business to your heirs, you need to decide how you will help pay estate costs, provide income for your spouse, and equalize distribution. If you have a buy-sell agreement in place already, it should be reviewed to ensure it doesn't cause significant inequity between the owners' families. If you don't have an agreement in place, you may want to consider an agreement that allows you to maintain control over the business and enjoy built-in flexibility. Alternatively, if you decide to sell your business, you should establish its fair market value, find a buyer and consider how you will ultimately invest the proceeds from the sale.