Business Succession

Business Succession Lawyer & Attorney for Frankfort, Kankakee, New Lenox, Mokena, Matteson, Tinley Park, and the Surrounding Communities

Helping Business Owners Transfer Companies to the Next Generation or Through Sale

Business succession planning is critical to assure that businesses have the right leaders in place should a key employee or owner leave, retire, become disabled, or pass away. It’s vital to a company’s overall stability to proactively protect customers, clients, employees, and estate beneficiaries.  In many cases, business owners are most concerned about transferring a business to the next generation in a tax-advantaged, uncomplicated manner which minimizes potential disputes.  Regardless of whether you want to transfer a business to your children or to someone else after death, I can help.

At RNH Law, as a business succession lawyer and attorney, I counsel small business owners as they contemplate reducing their involvement in daily operations, transitioning into retirement, and determining what should happen to their business in the event of an unforeseen medical event or following their death.  By getting to know your business and your goals, I can help develop an effective plan to help keep a business in the family (if desired), and to take into account matters such as how a succession should occur if not all of your children are interested in participating in your business.

Making the Decisions that are Best for You

RNH Law’s personalized approach to succession planning helps clients make pragmatic decisions that benefit the business owners, their families, the company, and valued employees.

If you would like help planning your company’s future, I invite you to call our office to schedule a free consultation.  I would look forward to meeting you at your business or another location at no cost to learn about your business and objectives.

In addition to providing business succession planning legal services, I also serve as external general counsel for business owners. In this role, I can advise and provide representation on any matters the confront the business.  And, as a small business owner myself, I fully appreciate the challenges and financial matters that all small business owners face.

Please feel free to call my office to learn more.  In the interim, the following information addresses several key issues that small business owners face with respect to succession planning.

Why Do I Need a Business Success Plan?

Unless a business owner simply plans to “close up shop” at some point, business succession planning is crucial – not only for those who you want to eventually succeed in company ownership, but also to maintain customer or client confidence that they will continue to be in good hands.  Sound planning with a business succession lawyer can help to achieve both of these objectives, as well as to ensure that there is a plan in place if you unexpectedly become incapacitated.

What is Business Succession Planning?

An effective business succession plan establishes your objectives and maximizes the potential for those goals to be realized.  Before formulating a plan, we will take the time to understand your business plan and goals. That way, we can provide tailored and strategic guidance that aligns with your best interests.

To ensure that your succession plan meets your needs, we will discuss various planning models.  As a Frankfort business succession planning attorney, I help with:

  • Management Succession Plans – If you become incapacitated, who will succeed you? Who will have legal authority to act on your behalf?
  • Ownership Plans – How should your business legally be transferred (such as through a stock sale, or by the transfer into a trust for your children or beneficiaries)?
  • Transition Plans – Do you want to sell your business to your children or others? Who can “buy you out” during your lifetime? If so, how should that work?
  • Taxation Plans – What will be the most effective way of accomplishing your goals while minimizing taxes?
  • Other Accommodations to Meet Your Personal Objectives – As an example, you may wish to provide for long-term valued employees who are not family members. We can help you plan for and implement this.

Can Taxes in Illinois be Minimized in Business Succession Planning?

Absolutely!

Pragmatic and strategic succession planning with an experienced business succession lawyer can significantly impact taxes.  From direct and installment sales to buy-sell agreements and outright gifts, there are many ways to transfer closely held businesses; however, each planning technique has varying tax consequences that must be carefully considered when developing future plans.

We can provide guidance regarding some of the most common strategies that business owners utilize to reduce transfer taxes, such as irrevocable life insurance trusts, valuation discounts, and estate tax deferments for closely held businesses.  When you choose RNH Law, we will leave no stone unturned in helping you find the most beneficial plan for the succession of your business.

What Can Happen if Business Succession Planning is Not Undertaken?

Unfortunately, many business owners fail to take the time to plan for situations such as death or physical incapacity, potentially placing a business that may have been developed over decades in financial peril.

For example, if an individual continues to run a business until his or her death with no succession planning, the inheritance tax on the business may be exorbitant.  When this occurs, family members are often forced to sell a business or critical assets at a “fire sale” price just to pay the taxes.  Consequently, these families lose out on the fruits of years of hard work and effort while the government and other opportunistic parties reap the benefits.

Planning for a business exit is critical to ensuring that your goals are carried out even after a successor takes over, as well as in connection with your estate and retirement planning.  Proper succession planning can help provide you with retirement income (even if you choose to transfer your business to your children), reduce taxes, protect loved ones, and ensure that your wishes are followed.

In Business Succession Planning, How Can I Keep the Business in the Family?

Business owners often want to transfer their business to their children, upon their death or retirement, with the hope that the business will be in the family for generations.  One of the simplest (but perhaps most undesirable) ways of accomplishing the initial transfer of the business to children will be through a transfer of stock ownership in the business upon the death of a founder.

Setting aside tax considerations, this strategy is often risky, as the spouses of a founder’s children may succeed to a legal interest in such stock in the event of a divorce.  With divorce rates typically being around 50%, if a stock transfer strategy is followed, the children of a founder may suddenly find that they are now business owners with a former in-law or ex-spouse, or even the children of the former in-law or ex-spouse.

Clearly, this situation is not intended and need to be protected against.  Successful business planning (such as through the transfer of business assets to a trust) can help avoid these ownership issues.

What if a Child Does Not Want to Be Involved in the Business?

In addition to the potential of having a non-family member, or ex-spouse, becoming a business owner, another critical factor in business succession planning is determining which children may want to continue in the business.  Often, some children may want to assume the reins of the parent/founder, while other children may want to move across the country and pursue other professions or work.

In most business succession planning cases, it will be best for all involved to have the children who will remain involved in the business be the sole owners of the business. This helps quell any disputes between those involved in the business full-time and those who are not involved in the business at all.  It will be critical for business owners seeking to pass the torch to the next generation to determine which children want to be involved in the business, and which do not, so that that an appropriate business succession plan can be developed. Once the interests of the children are known, not only can business succession planning be undertaken, but so too can effective estate planning.

As a business succession lawyer, I encourage clients to consider that dividing an estate fairly does not mean diving an estate equally.  For instance, if a business founder has four children, two of whom will continue in the business and two of whom will not, it likely will be best for all that the two children who will continue in the business inherit the full business, and that the two other children receive a fair market equivalent value.  There are many ways that the two “non-business” children can be fairly compensated: through other assets owned by the parent, through a “buyout” payment facilitated through a bank loan backed by the business assets, or through other mechanisms.

How Can I Prevent Fighting Among My Children Concerning the Business?

The more detailed a business succession plan is, the less likely it is that disputes will arise among those inheriting business assets.

Unfortunately, without a business plan, it’s often the case that an unintended consequence of a business inheritance is infighting by the children inheriting the business.  Some may want to sell the business immediately, while others may wish to continue in the business.  This may result in a stalemate, which causes the business to lose customers and value, and which can result in permanent damage to relationships.

For this reason, we encourage business owners to ensure this is not their legacy.

Is a Business Sale Right for Your Company?

In some instances, leaving a business to a founder’s children may not be an option.  Instead, the owner may wish to leave the business to valued employees, or they may wish to have the business sold and bequeath the sales proceeds to family or a charity.  In this case, it will be helpful to engage in business planning that clearly outlines how the business is to be treated so that a founder’s desires can be respected and carried out.  The role of an experienced business succession planning lawyer is to develop these options and procedures with an owner.

Take the Time for Business Succession Planning Now – Call to Schedule a Free Meeting and Consult.

None of us knows what the future may hold.  However, without business succession planning, if a business owner were to die today, the chances are high that there would be significant issues associated with the transfer of the business. It is also possible that there would be significant, unnecessary taxes that would need to be paid and disputes could arise among beneficiaries.

Without a smooth transfer of power, a business could be in jeopardy and may not survive.  Thus, a succession plan’s ultimate objective should be to smoothly transition business ownership to the next generation.  By creating a proper succession plan, you can avoid family disagreements, as well as inadequate tax planning, and provide the best opportunity for your company to not only survive but thrive during periods of change. This only serves to promote your legacy for generations to come.

Please Give Me a Call for a Free Consultation about Your Business Succession Planning.

I would look forward to meeting with you, learning about your business, and discussing your succession objectives with you so that a comprehensive plan can be developed.  I would also look forward to meeting you at your place of business, if you wish, so that I can better learn about your business.  I am available to assist small and closely held family businesses throughout Frankfort, Bolingbrook, Joliet, Matteson, Park Forest, Monee, Kankakee, New Lenox, Orland Park, Oak Forest, and the surrounding communities.

How Can I Help?

Please call me at (708) 279-4050 or fill out this form for a FREE Consultation.

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