Business Succession Planning for Small Business Owners
As a small business owner, you have unique estate planning needs that must be addressed to ensure a smooth transition when the point comes that you retire or can no longer run the business. However, transferring ownership of a small business—or even a family-run business—presents many legal hurdles. Family businesses are the backbone of the American economy and at the McCulloch & Miller, PLLC, our attorneys have extensive experience in business succession planning for small business owners. We will help you identify all the potential pitfalls and contingencies that may come up throughout the transition process and address them in advance.What Will Happen to Your Business When You Can No Longer Run It?
Small business owners all eventually face the same question about what will happen to their business when they decide to retire or can no longer manage the business due to their sudden disability or death. If you take no action now, chances are that your family will be scrambling to come up with a spur-of-the-moment solution that, in all reality, is not likely to be the best option. Thus, it is important to consider the future of your business well before the need to transfer ownership arises.
Small business owners have several options when it comes to succession planning, the most common of which include:1. Transfer Ownership to a Hand-Selected Person
Small businesses represent more than an income stream; often, they are a culmination of a business owner’s life’s work. Thus, most small business owners would prefer to pass ownership on to their children, family, or a key employee they trust that can effectively manage the business well into the future. While this may appear to be the easiest option, it still requires a business owner to identify and train a successor. Additionally, there are often significant tax consequences to the transfer of a business that must be accounted and properly planned for.2. Sell the Business
Many family businesses are incredibly valuable and could command a high price in the market. However, this is less likely to be the case if family members are unprepared for the sale. This is where the importance of a buy-sell agreement comes into play. A buy-sell agreement is a contract that arranges for the sale of a business when a certain condition is met, usually the retirement, death or sudden incapacitation of the business owner. Buy-sell agreements come in many varieties and can be customized to the unique needs and desires of the business owner and their family.3. Close the Business
In the event a business owner intends on closing their business when they can no longer operate it, there is still significant planning that needs to occur. For example, the closing of a business may require the sale of business assets, which will have tax implications on the owner’s estate. To close a business, someone must also file dissolution documents with the state.
A business owner’s decision regarding what they want to do with their business is a personal one; however, it is imperative that business owners consider all their options and plan ahead to ensure the orderly transfer of ownership.Do You Need Assistance with Business Succession Planning for Small Business Owners?
If you own a business and have not yet put plans in place for the transfer of ownership, reach out to the business succession lawyers at McCulloch & Miller, PLLC, for immediate assistance. We have more than 35 years of experience helping small business owners identify all their options and carry out their goals. We also offer a wide range of estate planning services to small business owners to ensure that whatever decision they come to does not disturb the other arrangements they’ve made with regard to their assets. To learn more, and to schedule a free consultation with an attorney to discuss business succession planning for small business owners, contact McCulloch & Miller, PLLC, at 713-333-8900 today. You can also reach us through our online contact form.