Business Succession Planning
Many closely-held businesses do not survive the transition to the next generation, in part because many small business owners have no exit strategy in the event of their disability, retirement or death. Most business owners find themselves too involved in the business to work on long-term issues such as planning for succession.
A good business succession plan determines who will take leadership and ownership of the business when the current owner is gone. In the family context, decisions need to be made about whether to leave the business to or have it run by the surviving spouse, and a challenge often presents itself, as part of the overall estate plan, as to how to treat children equitably, especially when there are active and non-active family members.
Often, buy-sell agreements are helpful to ensure the smooth continuation of a business after a potentially disruptive event, such as an owner’s retirement, incapacity, or death. Buy-sell agreements are contracts that control when owners can sell their interests, who can buy an owner’s interest, and at what price and terms.