Practice Subgroup

Business succession planning

We regularly advise clients on the succession of their business, whether the intent is to keep the business in the family for the next generation, or to sell the business outside the family. Keeping the business in the family, and passing it from one generation to the next, often presents difficult issues to address and hurdles to overcome. Often, these issues involve balancing the needs of family members who are active in the business with those who are not. The issues are sometimes monetary in nature, but can often be psychological.

We work with clients to develop strategies for the transfer of ownership of the business in a manner that minimizes income, gift and estate tax consequences, by using various techniques, including outright transfers and transfers in trust for the benefit of descendants. More complex and sophisticated techniques are also utilized when appropriate, including grantor retained annuity trusts (GRATs), installment sales to intentionally defective grantor trusts, installment notes, private annuities and self-canceling installment notes.

Business succession planning is one component of a business owner's overall estate plan. We advise clients on integrating the business succession plan into an overall estate plan.

Effective succession planning requires more than a leak-proof legal strategy. Developing a comprehensive plan demands the careful balancing of the ambitions, goals and concerns of all the concerned stakeholders.

One of the most important documents for any business succession plan is the buy-sell agreement. This agreement may be integrated into other documents, such as a limited liability company's operating agreement, or a partnership agreement, depending on the type of entity involved. Regardless of form, we work with the business owners to develop buy-sell agreements that will enable family members actively engaged in the business to acquire the interests of other family members or shareholders who are not active in the business, or who otherwise want to sell their ownership interests. We assist in negotiating and drafting the agreements, creating effective exit strategies, assessing valuation issues, and minimizing overall tax consequences to the family.