Business Succession Planning

According to the Small Business Administration, 90% of businesses in the US are family owned. Surprisingly, only 30% of these family-owned businesses continue to the next generation, and 15% into the 3rd generation. The primary reason for this failure is the lack of any business succession plan executed by the owners.

Our firm counsels business owners in succession planning for transfer of their businesses upon the death, retirement, or disability of one or more of the owners= in order to avoid disputes over ownership, valuation, and control. We assist successful business owners as well as medical and legal professionals to plan to address their concerns about transferring their business or practice to their chosen successor, establishing the valuation of the business, family succession, and sale of their interest in the business. We draft family limited partnerships and other sophisticated vehicles for tax savings and business success plans.

The family element in every family business can mean the difference between success or failure during the transfer process. The retirement, disability, or death of the business owner are all common events that can trigger a business transfer.

Tough questions must be asked and answered. Otherwise, a business that took decades to build can be destroyed overnight.

For example, who will run the business after you? Will it be your spouse, one of your children, or a non-family-member key employee? If your spouse will not run the business, will he or she still be financially dependent on it, or can you make arrangements to ensure they are financially independent of it?

What arrangements have you made for the inheritance of your children who are not active in the business? Have you in-law proofed your estate?

Thinking ahead to the second-generation transfer of your business, what provisions have you made to encourage thrift and industry among your grandchildren?

Coordinating Financial and Estate Plans

If your financial and estate plans are not carefully coordinated, there may not be enough cash to fund your objectives. An appropriately-funded estate plan can meet all of your people-planning objectives and provide liquidity for estate taxes (and business debts). Insurance, owned in the proper amount, type and manner, may be effectively used to fund such matters.

Other Possible Transfer Instruments

As part of helping you develop a complete estate and transfer plan, we will advise you about a variety of transfer instruments. These include buy-sell agreements, entity buy-sell, cross purchase buy-sell, and wait-and-see buy-sell. Each of these has a possible application for your plan.

Funding a buy-sell also presents a variety of options. We can help you navigate through each of these to make the best decision for your specific business or practice situation.

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