Choosing a Business Succession Plan

Learn everything about business succession planning and find out four family business succession planning strategies.

It takes a lot to make a business successful and remain successful these days. And after all of the time and money you’ve invested in building it up, it’s critically important to know exactly what you want to do with it down the road or what your business succession strategy is.

Do you want to retire from it one day? Will your children take over the business from you? These are questions only you can decide, with the help of trusted financial and legal advisors. But you have many choices for business succession planning as to how to dispose of your business, and each has its own special advantages.

1) Transferring your Business with a Buy-Sell Agreement

A buy-sell agreement is a legal contract that arranges for the sale of your business interest at some point in the future. Until that date comes, you’re still in control. Whether the agreement states that another party will buy the business when you retire, or when you die, or when you become disabled, you don’t have the normal problems that come with attempting to sell a closely-held business. The payment terms and the business valuation are already set, well in advance.

2) Transferring your Business through a Will or Trust

If you plan to stay active in the businesses during your lifetime, but want to transfer it to another party at your death, a “will” may be the best methods for you. Using a will allows the executor of your estate to keep the business running while your family takes over. A “living trust”, on the other hand, allows you to transfer the business to another while you’re still alive. You can help the new owner manage and operate the business, and the trust provides an income stream to you, and to your heirs after your death as well.

3) Transferring your Business through Lifetime Gifts

Another option is to transfer your business through lifetime gifts, either by making gifts of smaller portions of your business interest over a period of years, or by gifting your entire interest in the business at your retirement. Each year the IRS permits you to give away up to $13,000 (the 2010 figure) per recipient without incurring any federal gift tax. So you can make gifts of unrestricted stock while reducing the size of your estate in a tax-free way.

4) Selling your Business Interest

Finally, you can sell your business outright and receive cash or assets that can be converted into cash in the exchange. It’s often hard to find a buyer for a closely-held business though, because competitors don’t usually want to pay a fair price for the business.

With so many factors to consider when thinking about the future of your business, it makes sense to speak to an expert about your options. Call a BeamaLife specialist today at (877) 972-3262 to speak about family business succession planning or any other life insurance or financial planning matter or complete short life insurance quote online request now.