15th Jan 2016

If you’re a business owner, chances are you’ve worked very hard to create a successful and thriving business. In some cases, you may have dedicated your entire life to managing and growing your business. Depending on what stage of your business you’re in, it may be hard to imagine what will happen when you retire or pass away; however, business succession planning is critical.


Business succession planning is the process of identifying and developing a plan of how you want your business to operate and who you want to run your business after you retire or pass away. Similar to estate planning, if the proper plan is not put into place, it can cause a lot of time, fees and headaches for your loved once. Business succession planning is critical to preventing your business from getting caught up in ownership and control disputes among family members and shareholders.

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In order to create a well-planned exit strategy for yourself and your business, follow these 5 steps:


  1. Start Planning Now


The early stages of planning are critical. At some point, whether by retirement or death, you will leave your business. You will want to have a planned exit strategy in place complete with the income and resources your family will need once you no longer operate the business. Additionally, you’ll want to determine what type of succession plan is right for your business. The key is to begin the planning process early, so you can explore each option and put the best plan into place for your situation.


  1. Find Out What Your Business is Worth


In order to properly plan your exit strategy, it’ll be important to know what your business is worth. A professional can work with you to determine the worth depending on what you intend to do with the business. They can help you determine the worth if you plan to gift shares.

If you pass away while still managing the business, the value for gift and estate tax purposes and if you choose to sell the business.


The key in this step is to surround yourself with a team of quality professionals to ensure you’ve covered all aspects of your businesses’ worth and tax planning strategies. The implementation of a good exit strategy will minimize tax consequences, which provides continuing income after retirement as well as help if you’re passing the business on to a family member.


  1. Determine the Future of Your Business


As we previously mentioned, you’ve worked extremely hard to build your business and what happens to the business in the long-term is important to you. After you’ve established the need for your plan and what your business is worth, it’s important to envision what you want the future of your business to look like.


You should review your current business plan and then look ahead to develop your vision, goals and objectives for the future of the business. Think about who you want to run the business and the goals for the next generation of leaders. Consider who you want to make decisions around the business and establish a governance process.


In addition to the business goals, think about your personal goals. Think about your retirement and the cash flow you’ll need to live comfortably once you retire. By identifying the future of your business, it can help you put a clear succession strategy in place.


  1. Establish the Plan


The next step is to establish the succession plan. This step includes identifying successors, both family members and non-family members. In this step, you will select the individuals you want to manage and own the company. You will also identify the roles you want your family members to play as well as additional support you want to provide them.


In the state of California, there are a number of options available to business owners when you establish or execute your business succession plan:


  • Buy-Sell Agreements
  • Integrations with the Living Trust or other Estate Planning tools
  • Gifting
  • Stock Purchase Agreements
  • Stock Repurchase Agreements
  • Shareholder Agreements
  • Family Limited Partnerships

A legal professional can help determine which option is best for you and your business. A professional will also address tax implications based on the option you select. It’s important to select an option that will minimize taxes and avoid delays in stock transfers to remaining owners or successors.


  1. Complete and Sign the Plan


Once you have a plan in place and you’ve determine the value of your business and the goals for the future, work an attorney to complete and sign the documents to put the plan into place. Your estate planning attorney will draw up the documents based on everything you discussed and give them to you for review. Once you’ve reviewed the documents in full detail, you can sign and relax, knowing your business plan is secure. Each year you will want to review your business plan and make any adjustments or changes based on your business needs.




Business exit planning is critical, yet still two thirds of business owners lack a succession plan. Some business owners procrastinate, others believe a written will or verbal conversation will suffice and others ignore how quickly circumstances can change. The most important thing you can do as a business owner is surround yourself with a team of qualified professionals who can work with you to develop your plan.


When you begin planning your business exit strategy, work with an attorney who will discuss all the above steps and options in detail. Your attorney should take into consider your unique business situation including all family dynamics and business needs.


If you’re a business owner and you would like to establish your business succession plan, contact me today. It’s never too early to start planning. Call me directly at 1-714-385-0044 to schedule a free 30-minute consultation.

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