Business Succession Attorneys
We help business owners to craft estate planning strategies to increase the chances for the survival of their business upon disability, retirement or death.
What is Business Succession Planning?
As a small business owner in Texas, you’ve likely established your company as a sole proprietorship, partnership, or another form of closely held business. In the face of a competitive business environment and fluctuating economic conditions, you work hard to attract new customers, serve your clients, manage payroll, and ensure your business remains profitable enough to support you and your family. However, have you considered the essential steps to secure your business and financial future through a comprehensive estate and business succession plan?
Estate planning for business owners involves addressing both personal and business succession issues. This includes planning for the continuation of your business and preparing for contingencies such as retirement, disability, or death. You may wish to pass the business on to future generations, bring in new business partners, or sell it to the employees who have contributed to its success. Regardless of your goals, having a well-structured plan is crucial to ensure a smooth transition of the business.
A well-designed estate and business succession plan can help you achieve your objectives, protect your business’s legacy, and provide financial security for your family. Working with an experienced estate planning attorney in Texas can help you navigate the complexities of these plans and tailor them to your specific needs and wishes.
Every Business Owner Needs a Succession Plan to Protect Their Legacy
Addressing the succession of business interests upon the death or incapacity of a business owner is a critical component of business succession planning. Here are some considerations and options to plan for the future of your business:
Right of Survivorship: Determine whether the surviving business owners, partners or members will have the right to purchase the incapacitated or deceased’s shares or interests. This can be structured through a buy-sell agreement, which specifies the terms and conditions of the purchase.
Mandatory Redemption: Decide if the company itself will be required to redeem the incapacitated or deceased shareholder’s or member’s shares or interests. This ensures that the business retains control over its ownership structure.
Heirs’ Ownership Rights: Consider whether the deceased’s heirs will have the right to own the shares or interests. This option may be suitable if the heirs are capable and willing to participate in the business.
Beneficiaries’ Involvement: Determine if the deceased shareholder’s or member’s beneficiaries should have the option to continue in the business. This can be beneficial if the beneficiaries have the skills and interest to contribute to the business’s success.
Funding the Purchase or Redemption: Establish how the purchase or redemption of shares or interests will be funded. Common methods include:
- Life Insurance: Use life insurance policies to provide the necessary funds. The business or the remaining shareholders/members can own the policy, and the proceeds can be used to buy out the deceased’s interests.
- Installment Payments: Arrange for the purchase price to be paid over time, which can ease the financial burden on the business or surviving owners.
Structuring the Buy-Sell Agreement: Clearly outline the terms in the buy-sell agreement, including:
- The valuation method for determining the purchase price.
- The process for executing the buyout.
- The roles and responsibilities of all parties involved.
By carefully considering these options and structuring the appropriate agreements, business owners can ensure a smooth transition and continuity of the business in the event of a shareholder’s or member’s death. Consulting with an experienced Texas attorney at Akinlabi Law can help tailor these arrangements to fit the specific needs and goals of the business and its owners.
