A Checklist For Business Succession Planning


If you are a business owner, business succession planning should be an integral part of your overall estate planning strategy. Such planning will improve the chances of success for a family business when the original owners retire, pass away, or are simply ready to transfer the family business to the next generation. Use this business succession planning checklist to help you prepare yourself, your family, and your business for the future.

1. Make sure your overall estate plan includes your business succession plan. The two plans should be carefully created, so they fit together.

2. One of the most critical yet most overlooked business succession issues is a solid management succession plan. It requires being realistic about who is capable of taking over the business when the owner is ready to pass on the business. Who in your family is prepared to continue running the business? If your family cannot continue the business, who can?


3. Consider having a buy-sell agreement in place. This is one of the most effective strategies for protecting your family and your business when you retire. There are two types of buy-sell agreements; voluntary or mandatory. A voluntary agreement permits your business partners to negotiate the purchase of your interest in the business. A mandatory buy-sell agreement leaves no other option.

4. Another measure to take to ensure your family has sufficient resources to hire someone to replace you, if necessary, is a life insurance policy.


5. Consider a retirement plan to make sure you have sufficient income for retirement from your business. Otherwise, if the business owners take a substantial amount of money from the business when they retire because they did not plan for retirement appropriately, the business may not have enough resources to continue.

6. How will the estate taxes on your family business be paid? In order to successfully transfer the family business to the next generation, estate taxes should be a primary concern.

7. Consider transferring interests in the family business to your children as gifts early on. Owners may transfer interest in the family business to their children at an early age and still retain complete control.

correct entity setup Attorney8. Make sure you have chosen the proper business entity. Two choices to consider are the family limited partnership and the limited liability company. These are popular because of their greater asset protection abilities and the flexibility they offer in terms of income taxes.

9. You may want to create a revocable living trust to own the general and limited partnership interests of the business. That way, you or your successor trustee will be able to manage the partnership without the need for a conservator or guardian.


10. Married couples should agree on the ultimate disposition of the family business. Too often, the spouse who primarily operates or manages the family business fails to discuss business succession with the inactive spouse, often resulting in business succession planning efforts being more complicated or costly.

If you have questions regarding business succession planning or any other family business planning matters, please contact our experienced attorney at The Law Office of Michael Paul, PLLC, for a consultation.

You can contact us either online or by calling us at 919-951-7955.

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