Innovative Business Strategies

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Getting Better Business Transition With
Succession and Buy/Sell Agreements

Business succession conjures up traditional visions of parents bringing the kids into the business and transferring ownership their life-long enterprise to family members when it is time to retire. Planning and implementing successful multi-generation business transitions have been some of the most rewarding experiences I have had in my law practice. The ones that have failed due to changes in personalities, circumstances and level of trust have been heart breaking.

Most successful succession plans begin early with tiny ownership transfers in the most economically and tax efficient manners possible to test acceptability and comfort for the current and new generation of family owners moving forward.  The pace of succession can be set by performance measures or simple time benchmarks.  Moving family and related members into the ownership group can occur by a combination of gifts, sales and inheritance.  Together we can analyze the business, tax and estate planning involved in your succession plan.

Buy/Sell Agreements

Business ownership has been trending toward combinations or multiple related and unrelated parties because of the increased practical need for accessibility to resources, differing capabilities, niche visions and differing levels of persistence to be successful in an ever-changing business environment.

The dynamics of these two business ownership structures are different.  While the patriarchs of family-owned businesses may generally work at a tolerant pace to achieve successful multi-generational ownership succession, the universal chorus for unrelated business owners usually is they do not desire to continue in business with one’s spouse or family.  Family patriarchs find themselves in the identical position when need to escape because the implementation of a succession plan unexpectedly becomes unattractive or unworkable.

Both family-owned and businesses composed of multiple related and/or non-related owners, however, need succession and buy/sell agreements to outline who succeeds to leadership and ownership in the event one dies, becomes disabled, quits or retires.  Those agreements also need to place enforceable restrictions on the sale and transfers of ownership interests within the ownership group and third parties.

The toughest discussions I have with business owners when formulating their agreements is how they address a dead-lock in the decision-making process or a paralysis caused by changes in personalities, circumstances and perceived or actual breaches of trust. It will never happen to us as business partners is a fable.

Purchasing the ownership interest of the departed or departing party by the company and/or remaining owners is the most common course or action.  The obstacle is that the company and buying owners and selling party are naturally at odds over the price and the pace at which money is paid out.  Buy low and sell high is the universal starting point of most of these discussions when assembling buy/sell agreements for differing owners or curing a succession plan that has gone awry.  Sources for the funds necessary to bring the plan to life and survive through fruition needs an experienced practical and innovative hand to assist in the formulation and intervene with the parties to reach an amicable and practical agreement.

My experience in structuring succession and buy-sell agreements for owners in all lines of business can set a well-reasoned, stable and efficient platform in the early stages of your business planning for resolving and concluding differences that may develop in the future between business partners.

My Business Transition Services:

  • Structuring, preparation and implementation of ownership transition plans and all assignments and transfers needed to consummate such transfers.
  • Analysis of the tax implications of current and future proposed ownership transfers.
  • Review of alternatives for funding of current and future purchase and sale obligations within the plan, if any.
  • Preparation and implementation of transfer restrictions, performance incentives and procedural elements needed for enforcement of agreements.
  • Continual update of company and individual records to reflect changing ownership.
  • Periodic reassessment on advisability of continuation of plan and structuring, preparation and implementation of modifications needed to achieve updated ownership transition goals.

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