Estate Planning and Business Law

Business Succession Planning

An important area overlooked in the estate planning process, especially for owners of closely held or family owned businesses, is business succession planning.

These businesses are often the largest asset in the owner’s estate.

It is usually the source of the majority of the owner’s income while working and for retirement.

Any unexpected life change in the business can severely impact any plans unless a good estate and business succession plan is in place.

An analysis of the following issues should be considered when planning for business succession:

  1. The impact on the family’s short and long term finances. Concerns include how will the family manage without the business income and keep its current standard of living.
  2. The short term effect on the business. Concerns here include how the business will meet its short term and long term cash requirements to survive.
  3. The long term effect on the business. Concerns here include whether you can transfer your business without having a detrimental impact on employees, the business, your suppliers and buyers. Another concern is whether the shareholder transferring her business interest will get full value for her share.
  4. The liquidation value of the business if it has to be sold under a “fire sale” scenario.

Solution to the above concerns is implementing a buy-sell agreement when establishing your business or preparing your estate plan, The business succession plan will require one party to sell to another their business ownership interest when there is a death, disability or retirement of a partner.

These agreements can be used by most business entities – sole proprietorships, partnerships, LLCs, S-Corporations and C-Corporations.

The lawyers of Blackwell, Santaella & Jahangiri, LLP can assist you with this very important part of your estate planning – the business succession plan.