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Succession Planning
Every business changes hands eventually. The only variable is whether it happens on your terms.
What Succession Planning Actually Is
Succession planning is the process of deciding (and documenting) how ownership and leadership of a business will transfer, and then structuring the company so that the transfer can actually happen without destroying value.
It is not the same as estate planning, though for most business owners the two are inseparable. An estate plan directs what happens to assets. A succession plan makes sure the largest of those assets is still worth something when it gets there, that someone is able to run it, and that the transfer does not trigger a tax event nobody planned for.
The businesses that transfer well are the ones that started the conversation years early. The ones that transfer badly are almost always the ones where the plan was a conversation everyone kept meaning to have.
What We Handle
Buy-sell agreements
What happens to an owner's interest on death, disability, divorce, dispute, or departure, who can buy, at what price, and how it is funded.
Equity transfers
Moving ownership to family, management, or employees, structured for the tax consequences rather than in spite of them.
New partnerships and admissions
Bringing an owner in, which is the mirror image of the same problem and is usually where the buy-sell should have been written.
Management succession
Leadership transition where the person running the business is not the person who owns it.
Deferred profit sharing and phantom stock
Retaining the people who need to stay through a transition, without necessarily making them owners.
Employee ownership-style transitions
Structures for transferring a business to the people already running it.
Key-person insurance
Funding a buy-sell obligation so that the surviving owners are not forced to sell to pay for it.
Emergency and continuity planning
Who has authority tomorrow morning if the owner is suddenly not there. The plan almost nobody has.
Estate and probate crossover
Wills, trusts, family trusts, and probate administration where the business is the family's principal asset.
Sound familiar?
Three Ways a Business Changes Hands
To a third party
A sale. The cleanest financially and usually the highest value, but it ends your involvement and requires the business to be genuinely sale-ready. See Sale Preparation & Exit Readiness.
To family
The most common intention and the hardest to execute. Raises questions of fairness between children who are in the business and children who are not, funding, control during transition, and whether the successor actually wants it.
To management or employees
Preserves continuity and culture, and rewards the people who built it with you. Usually requires creative funding, since the buyers are being paid by the business they are buying.
Who Does This Work
Robert J. Riccio
A CPA with an LL.M. in taxation from NYU. Business succession, complex tax planning, estate planning, trusts, and fiduciary matters (the full span this work requires).
Jordan W Gerheim
The corporate and governance side: equity structure, agreements between owners, and coordination with the family's other advisers.
Benjamin H. Kilborn, Jr.
Transition from the operating side, including management succession and the practical handover of a business that has to keep running.
Six Questions That Decide Whether a Succession Works
If you cannot answer these, the plan is an intention rather than a plan.
Who is taking over, and have you asked them?
A startling number of succession plans rest on an assumption about a child or a manager that has never been put to them directly.
What happens if you are gone tomorrow?
Not in ten years. Tomorrow. Who signs, who has banking authority, who tells the customers.
How is the buyout funded?
A buy-sell obligation with no funding behind it forces a sale of the business to satisfy it. The exact outcome it was meant to prevent.
What is it actually worth?
Succession planning built on an owner's estimate of value routinely collapses when a real number appears.
How are non-participating family members treated?
The fairness question in a family business is rarely legal and always decisive. It should be settled deliberately rather than by default.
Does the business survive the transfer?
If every key relationship runs through the departing owner, what is being transferred is smaller than it looks.
How This Work Is Billed
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Frequently Asked Questions
When should we start succession planning?
Earlier than feels necessary (five years before an intended transition is a reasonable target, and there is no such thing as too early for a buy-sell agreement). The structuring options that produce the best outcomes generally require time to implement, and every one of them narrows as the transition gets closer. The worst version of this work is done under time pressure after something has already happened.
What is a buy-sell agreement and does every business need one?
It is the agreement governing what happens to an owner's interest when they leave, die, become disabled, divorce, or want out, who may buy, at what price, on what terms, and how it is paid for. Any business with more than one owner needs one, and the right time to write it is while everyone still gets along. We litigate the disputes that arise where none exists, and they are among the most destructive a business can suffer.
Our succession plan is that our children take over. Is that enough?
It is an intention rather than a plan, and it usually needs three more things: confirmation that they want it and are able to do it, a structure for transferring ownership that does not create an unmanageable tax event, and a decision about how children not involved in the business are treated. The last one is the most common cause of family conflict after a transfer and the one most often left unaddressed.
How does this interact with our estate plan?
They have to be built together, because for most owners the business is the estate. An estate plan that divides the business among heirs who cannot agree on how to run it can destroy the value it was meant to preserve. We have attorneys covering both the business and the estate side, which is unusual and is precisely what this work requires.
What if we would rather just sell?
That is a legitimate and often the best answer, and it is a different project. Sale Preparation & Exit Readiness covers getting the business ready to be sold, which typically takes considerably longer than owners expect and is where most of the value is either preserved or lost.
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The Conversation Everyone Means to Have
Book a Risk-Free Strategy Session. Even an hour spent on this now narrows the range of bad outcomes considerably.