Business Succession Planning

On average, only one in three closely held businesses successfully passes on to the next generation. A lack of proper transition planning is often why businesses fail after founders retire, sustain a disability, or die. By implementing a business succession plan, you can help protect your company's future.

At a minimum, a good plan should help you accomplish the following:

  • Transfer control according to your wishes.

  • Carry out the succession of your business in an orderly fashion.

  • Minimize the tax liability for you and your heirs.

  • Provide financial security for you and your family after you step aside.

A succession plan should be part of your overall financial plan, encompassing all of your needs and objectives. Tax minimization strategies play a key role in the overall planning process.

Adopting the following strategies may help lower your tax liability:

  • Gift stock to family members. Begin now so ownership can be transferred while avoiding unnecessary transfer taxes.

  • Employ a buy-sell agreement that fixes the estate tax value of your business. An effective agreement provides estate tax liquidity and provides your successors with the means to acquire your stock.

  • Create an employee stock ownership plan (ESOP), and sell your stock to the plan. Special rules allow you to sell your stock to the ESOP and defer the capital gains tax if you reinvest in qualified securities. Ownership can be transferred to your employees over time, and your business can obtain income tax deductions for the plan contributions.

  • Plan to qualify for the estate tax installment payment option. It allows you to pay the portion of your estate tax attributable to your closely held business over a period of up to 14 years. Artificially low interest rates apply during the tax-deferral period. Other special rules apply.

Call us for help securing your company's future with a business succession plan. We can guide you through this complex process.