Business Succession Questions… and Answers, By Estate Planning Attorney, Rodney H. Piercey, J.D.

October 02 14:21 2019
Business Succession Questions... and Answers, By Estate Planning Attorney, Rodney H. Piercey, J.D.

Question: Could you tell me what “Business Succession Planning” is, and give me a few basic tips about it?

Answer: Business Succession Planning is simply planning in advance for the transition of your business at the time of your retirement, disability or death. Here are a few alarming facts about what happens when the planning is inadequate:  a) Only 30% of family owned businesses survive to the 2nd generation, only 12% survive to the 3rd generation, and only 3% to the 4th generation! b) A University of Connecticut Survey of 800 family owned businesses found that 48% of all business failures were precipitated by the founder’s death.  Here are a few tips:  

The planning for the succession of your business might take a few months, and cost a few thousand dollars, but it could save years of trouble and hundreds of thousands of dollars later on.

  1. Business Succession Planning could assure the continuation of your business after your death or retirement, thereby protecting your investment for your heirs as well as the jobs of your loyal employees.

  2. Without Succession Planning, your business could be forced to close because of estate taxes or disputes among heirs or heirs and current owners.


Question: 
My partner and I have spent the past 30 years building our business. The business is now worth about $3,000,000. My partner is 10 years older than me, so I am concerned that if he passes away, his wife will become my partner. She really has no knowledge of our business, and would have an equal vote with me.  What can we do to avoid this situation?

Answer: That is a great question, and many business owners face the same issues. You can enter into a Buy/Sell Agreement with your partner to provide for the sale of each of your shares of the company to the other upon the death of either of you. In this Agreement, you can agree on a fair price in advance and provide for the method of payment of the purchase price, which can be in cash funded by insurance, or can be in installments over a number of years, or some combination of the two. That agreement will be beneficial to all parties, since your partner’s wife would benefit in knowing she will get some value for her husband’s many years of hard work, and you would know you could continue your business without interference.

 

Question: I have two questions. I started my business 20 years ago and I just turned 60. Is it time for me to start to think about Business Succession Planning, and if I still own by business when I pass away, will it be taxed as part of my estate?

Answer: You should start the process of Business Succession Planning right away. It may take years to implement the plan that is best for you, so now is the time to start. And yes, your business will be taxed as part of your estate, if your entire estate, including life insurance at face value, all retirement accounts, real estate equity, and all of your investments, exceeds the Federal or State tax free amounts at the time of your death. Since the estate tax is about half of the value of your estate and it is due 9 months after your death, there is great incentive to plan to legally avoid all estate taxes.

 

Question: I’m thinking of selling my business, and I wondered if there is any way I could avoid a huge capital gains tax on the sale?

Answer: Yes, there are several perfectly legal techniques to avoid capital gains taxes on the sale of your business, but you would need to sit down with a competent attorney to see how they might work in your case. One of the techniques also allows you to give money to your favorite non-profit that would have otherwise gone to the government in taxes, so it offers a double benefit.  

Media Contact
Company Name: Piercey & Associates, Ltd.
Contact Person: Kim Araujo
Email: Send Email
Phone: (312) 451-2561
Address:1525 S. Grove Ave., Suite 204
City: Barrington
State: Illinois
Country: United States
Website: http://pierceyassociates.com

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