Business Succession Planning

Recent reports have advised us that a large portion of individuals are employed by small businesses.  Many of those small businesses are family owned businesses that may have been started by Mom and Dad and employ one or more children.  When it comes to Estate Planning, your business succession plan should be addressed in your estate plan.  Many business owners wait too long to consider their succession plan and unfortunately, a health crisis arises and the decisions are made under a lot of stress.  It is always much easier to make decisions when you are not in failing health  or in emotional crisis.  In some situations, the business owner may not have a family member to consider and may want to look at a management team member or even someone from the outside.  Many attorney’s and CPA’s that deal with business succession planning and estate planning feel that business owners need to be very pro-active and start planning at a minimum of six to seven years in advance of their retirement. 

One of the most common issues in business succession planning and estate planning is the desire of a business owner to divide their estate equally amongst their children.  For many of these business owners, more than half of their wealth is tied up in the business and it is difficult to figure out a fair or equitable division.  If a business owner employ’s a family member, such as a son, the business owner needs to decide whether it would be prudent to make non-active children a passive or an active shareholder of that business.  In many situations, there is the ability to begin transferring or selling the business to the active son, while the business owner is still actively involved in the business.  The key to making sure that a business succession plan and estate plan work well together is to make sure that you create a team of advisors.  The best business succession plan and estate plan can typically consist of your corporate attorney, your CPA and your estate planning attorney.