Business Succession Planning

Questions to Ask
When developing a succession plan for your business, you must make many complicated decisions. Should I sell my business or give it away? Should I structure my plan to go into effect during my lifetime or upon my death? Should I transfer my ownership interest to my family members, co-owners, employees, or an outside party?

The key is to pick the plan that best meets all of your needs and objectives, and to seek help from financial and legal advisors to carry out this plan.

Selling Your Business Outright
You can sell your business outright, choosing the right time to sell – now, at your retirement, at your death, or anytime in between.  Proceeds of the sale can be utilized for maintaining your current lifestyle, paying estate taxes, covering other final expenses and providing for family needs.

If the sale price is at least equal to the full fair market value of the business, the sale will not be subject to gift taxes. However, if the sale occurs before your death, it may result in capital gains tax.

Transferring Your Business with a Buy-Sell Agreement
A buy-sell agreement is a legally binding contract that establishes when, to whom, and at what price you can sell your interest in a business. A typical buy-sell allows the business itself or any co-owners the opportunity to purchase your interest in the business at a pre-determined price.

Features of a Buy-Sell Agreement

  • Avoid disruption of operations
  • Avoid entity dissolution/liquidation
  • Minimize the possibility of entity falling into the hands of outsiders
  • Ability to set the purchase price as a taxable value of your business
  • Minimize the possibility of unfair treatment of your heirs
  • Minimize estate taxes

Additionally, because funding for buy-sell agreements is typically arranged when the agreement is executed, you’re able to ensure that funds will be available when needed, thus providing your estate with liquidity for expenses and taxes.

Gifting Your Business
If you are like many business owners, you would prefer to have your children inherit the result of your years of hard work and success. Of course, you can bequeath your business in your Will, but transferring your business during your lifetime has many additional personal and tax benefits.

By gifting the business over time, you can hand over the reins gradually as your offspring become better able to control and manage the business on their own. You can also minimize gift and estate taxes.

It transfers the value of any future appreciation in the business out of your estate to your heirs. This can be especially valuable if business growth is expected.

Gifts are tax free under the annual gift tax exclusion. Aggregate gifts above the annual gift tax exclusion up to $5 million are tax free under your lifetime exemption.

Partial interest gifts, as with Grantor Retained Annuity Trusts (GRATs) and Family Limited Partnerships (FLPs), may be valued at a discount for a lack of marketability or restriction on transferability.

Our Wealth Advisors, together with our Wealth Strategists, can assist you with and provide solutions to your business succession planning and business exit strategy.

Your Regions Wealth Advisor can bring a custom team of experts together to help you maximize the return of your portfolio. To learn more about putting a Wealth Advisor to work for you, have a Wealth Advisor contact you.


Investment and Insurance disclosures

Investments in securities and insurance products held in trust accounts are not FDIC-insured, not deposits of Regions Bank or its affiliates, not guaranteed by Regions Bank or its affiliates, not insured by any federal government agency, and may go down in value.