In our last post we attempted to emphasize the importance of undertaking succession planning early in the life cycle of a newly launched business. For the sake of the company's ongoing success, it is wise to know when the reins will be handed over and to whom.
But another factor that deserves to be addressed is the how of that transfer. If the goal is to make sure that your Minnesota business stays in specific hands, it can be equally important to identify what strategies will be used and to document the expected process. Think of this as the point at which business planning and estate planning intersect. Consider the value of having legal counsel that is experienced in both these areas of the law.
For those who might be thinking about these issues, here are some ideas on ways to make for a smooth succession of leadership.
- Family limited partnerships: This method can be specifically useful when transferring business control within a family. Step one involves setting up a partnership structure with general and limited partner interests. The business is put in the name of the partnership. In the course of time, interest in the business can be gifted to family members.
- Buy-Sell agreement: This is a contract that obligates a buyer to purchase your business from you at some later date. The trigger for the transaction could be your retirement. It might also result from divorce, disability or death.
- Private annuities: Business ownership transfers to family members or someone else on the basis of a promise to make a regular payment to you until your death. IN addition to possible tax advantages, as part of estate planning the payment could be granted to a surviving spouse.
This list is not all-inclusive. Other strategies may be available depending on what you want to accomplish and when. Speaking with an attorney is recommended to explore options that might work for your circumstances.