How to Develop an Estate Succession Plan for Your Busines
Business succession plans begin with many questions:
Some of the many business succession questions we review are:
- How is the business currently structured? It the business sole proprietorship? A partnership? Is the entity a corporation. A variation of one of these standard structures?
- Is the business a family run business? According to the Conway Center for Family Business, most small businesses are family-controlled. 1/3 of Fortune 500 businesses are also family -controlled. Also, the median age of family control in the core company is 60.2 years of age.
- Who should manage the business? Do you want it to be an existing co-owner or co-worker? Do you want to bring in someone new?
- Should the business be sold instead of allowed to continue? In many businesses, the business effectively dies when the owner of the business dies?
- What are the tax considerations? There are federal and Florida state tax consequences for transferring business interests.
- How will the value of the business be determined? There are different ways to value a business. Buy-sell agreements and the other legal documents can help set the value
- How can the business best provide for your family? Your business supports your spouse and children. Estate planning requires thinking through how the business can continue that support after you die.
- Will the people who own the business run the business? For example, you might choose a spouse as the owner or your restaurant. You might then select a professional restaurant manager to run the restaurant.
We help you consider the right questions
There are many practical considerations to crafting the right documents. Owners, family members, and employees should know where the stand. Workers are more likely to stay with a business if they know death won’t mean losing a job. Most small businesses and family businesses don’t have any written arrangements. Most partnership and corporate arrangements fail to address key issues.
Current owners should name future owners on their life insurance policy. Life insurance should cover the costs to transition the business from one owner to the next. Business owners should consider what might happen if they can’t run the business due to old age or some illness.
Strategies our Vero Beach and Sebastian lawyers use
Our business succession lawyers, therefore, review the following business control methods
- Wills decide whether the executor sells or continues your business after you die.
- A living trust can help transition your business to new owners. It can also help to avoid probate and reduce taxes. Trusts are more private than wills.
- Buy-sell agreements. Our business succession lawyers tell many owners to create a written buy-sell agreement. This agreement explains when and how a future owner can obtain your business interest – when your die. Buy-sell agreements also explain what happens if you become incapacitated. Most buy-sell agreements include the need to get life insurance for the business.
- Partnership agreements. Partnership agreements can set forth:
- Which partners will own the business?
- Which partners will manage the business?
- How to determine the fair market value of the business?
- Many other succession issues
- Corporate documents. Corporate ownership usually requires owning a majority of the stock. Stock owners can name who gets their stock by will, trust, or by other legal means. Stockholders can also craft shareholder agreements. These agreements help decide who runs the business. Corporate by-laws also detail business succession issues
There are other legal ways to protect control of your business. For example, a limited liability partnership or corporation can protect personal assets.
Speak with an experienced Florida business succession attorney today
Our business succession lawyers help business owners choose the next generation for their business. We have been advising seniors, families, and business owners for over 30 years. At Lulich Attorneys and Consultants, we first work to understand your goals.
We recommend a variety of strategies. We help you choose the right strategy. In conclusion, we prepare the correct documents to create your goals. For clear guidance, please call us at 772-589-5500 (Sebastian) or 772-774-7771 (Vero Beach) to make an appointment.