Business Succession Planning is Heavily Intertwined with Estate Planning

The basic, underlying purpose of estate planning is to make sure your assets go to the individuals you want to receive those assets. If you own a small or mid-sized business that’s closely held, you certainly want to make sure an asset of such significance is passed on effectively and according to your goals. While business succession planning is distinct from estate planning, they cannot be fully separated for entrepreneurs who are thinking about the next generation. 

What’s In a Business Succession Plan?

Before you create a succession plan for your company, you have to determine the method best suited to pass on your ownership and managerial interests to your successor. This could happen in a few ways: 

  • You sell your portion of the business to other owners or to another internal stakeholder. 
  • You sell your portion of the business to a friend or family member. 
  • You sell your portion of the business to a third party or allow your business to be acquired by or merged with another entity.
  • You pass on your portion of the business to a beneficiary through estate planning documents (perhaps by transferring your ownership interests into a trust). 

For more on business succession planning and important components, please refer to a blog we previously published on the subject. 

How Does Business Succession Planning Interact with Estate Planning?

While estate planning is intended to distribute your assets to your intended beneficiaries, that’s certainly not the only purpose. Advanced estate planning strategies and tactics can both help you distribute your assets and protect them from creditors and taxable events in the meantime. As a business owner, a significant portion of your wealth is probably tied up in your business. Whether you’re selling your ownership interests to one of your heirs or using an estate planning document to transfer it, a few proactive steps might help your asset keep as much of its value as possible. That could include gifting the business to an heir, which would involve another complex set of implications. 

So, to recap, the ultimate goal of business succession planning is to ensure that your company outlives you and continues generating wealth for your loved ones. Estate planning is meant to protect your assets and efficiently pass them to your beneficiaries. Both require significant interaction to make sure your children and grandchildren enjoy the fruits of your labor for years to come.

Monahan Law Firm routinely helps business owners shift their ownership interests to other individuals. Our team also handles complex estate planning matters. If you’re looking for a firm that can help you with both of these critical considerations, we’d love to talk sometime soon. Contact us through our website to set up an appointment.

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