A successful business may represent years—or decades—of work, investment, relationships and family wealth. Yet many owners spend far more time planning how to build the business than planning what should happen when they retire, become disabled, die unexpectedly or decide to sell.
Drazen Rubin Law helps Connecticut business owners develop succession strategies designed around their goals, ownership structure, family circumstances and broader estate and tax planning needs.
Business succession planning may involve transferring ownership to family members, arranging a sale to a partner or key employee, preparing for a third-party sale, coordinating buy-sell agreements, addressing death or disability, and considering the tax and estate-planning consequences of a future ownership transition.
No single succession strategy is right for every company. The appropriate plan depends on the business, its owners, potential successors, governing documents and the circumstances surrounding the transition.
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A business succession planning attorney helps owners prepare for the future transfer, sale or continuation of a business. Planning may address ownership transfers, buy-sell agreements, family succession, retirement, disability, death, tax considerations, estate planning and the legal documents needed to carry out the owner’s objectives.
A succession plan may involve:
Business succession planning is not simply about what happens when an owner dies. It can also help provide a framework for retirement, changing ownership responsibilities, family transitions and unexpected events.
Without a clear plan, a business transition can create uncertainty for owners, family members, employees, customers, lenders and business partners.
Questions can arise quickly:
A carefully considered plan can help clarify those issues before a transition occurs.
Succession planning does not have to wait until retirement is imminent.
In many cases, earlier planning provides more time to evaluate successors, structure ownership, coordinate legal documents and address tax or estate-planning concerns.
You may want to speak with a business succession planning attorney if:
Retirement can involve more than choosing a date to leave the business.
Owners may need to decide:
Starting earlier can create more flexibility in evaluating those options.
Family succession can be rewarding, but it can also raise difficult legal and financial questions.
One child may be actively involved in the business while another is not. Multiple family members may want different roles. The owner may want to treat children fairly without dividing the business equally.
An attorney can help structure the ownership transition in a way that coordinates with the owner’s estate plan and business goals.
A closely held business should consider what happens if one owner retires, becomes disabled, dies or wants to sell.
A buy-sell agreement or related ownership agreement can establish a process for those events.
A succession plan may involve selling the business to:
The legal structure of the sale can affect ownership, taxes, payment terms, liability and the owner’s post-sale obligations.
Business interests are often among an owner’s most significant assets.
If the estate plan does not coordinate with the company’s governing documents and succession arrangements, conflicts can arise.
Succession plans should be reviewed after significant changes such as:
A plan that made sense several years ago may no longer reflect the owner’s goals.
For many privately held businesses, succession is as much a family issue as a business issue.
An owner may want the company to remain in the family, but family members may have different interests, abilities or expectations.
Some children may work in the company. Others may pursue different careers. One family member may be prepared to run the business while others would prefer to receive different assets through the estate.
A family business transition may involve:
The appropriate approach depends on the owner’s goals, the successors and the structure of the business.
Equal does not always mean equitable.
If one child receives the operating business, the estate plan may need to consider how other beneficiaries will be treated.
That can involve life insurance, trusts, other assets or different ownership arrangements.
There is no universal formula. The objective is to create a plan that reflects the owner’s priorities while considering the future needs of both the business and the family.
Legal planning cannot determine whether a successor is ready to operate a business.
However, succession documents can help clarify:
Those legal arrangements can support the broader management transition.
A buy-sell agreement can be one of the most important components of a closely held business succession plan.
It generally establishes rules governing what happens to an owner’s interest when certain events occur.
Those events may include:
A properly structured agreement can address who may purchase an ownership interest, how the purchase price is determined and how the transaction may be funded.
Under a cross-purchase arrangement, the remaining owners may have the right or obligation to purchase the departing owner’s interest.
The legal and tax consequences depend on the structure and circumstances.
A redemption agreement may provide for the business itself to purchase the ownership interest.
The company’s financial position, governing documents and tax considerations should be evaluated when determining whether this structure is appropriate.
Corporations with multiple owners may use shareholder agreements to establish rights and restrictions involving ownership transfers, voting and future purchases.
An LLC operating agreement can address what happens when a member dies, becomes disabled, retires or wishes to transfer an interest.
For many closely held companies, the operating agreement is a central succession-planning document.
Some ownership transitions are planned years in advance. Others occur unexpectedly.
A business succession plan should consider what may happen if an owner dies or becomes unable to participate in the company.
Relevant questions may include:
Addressing these questions in advance can help reduce uncertainty during an already difficult period.
Retirement planning for a business owner is often closely tied to the future of the company.
The business may be a significant source of retirement value, but converting that value into retirement income may require a sale, buyout or gradual ownership transition.
A succession plan may evaluate:
The planning process should take into account both the future of the company and the owner’s personal financial objectives.
For some owners, the preferred succession plan is a sale rather than a family or internal transition.
Preparing for a sale may involve:
Business sale planning should be coordinated with appropriate legal, tax and financial professionals.
A succession plan and an estate plan should work together.
An owner’s will or trust may govern who receives a business interest at death, while the business’s governing documents may impose separate restrictions on ownership or transfer.
If those documents are inconsistent, complications can arise.
Succession planning may therefore involve coordination among:
The objective is to make sure the owner’s personal estate plan and the business’s legal documents are aligned.
Business transfers can have significant tax consequences.
Depending on the transaction, relevant issues may involve:
The tax treatment of a business succession strategy depends on the facts and the law in effect at the time.
Drazen Rubin Law can evaluate legal and tax considerations as part of the broader succession-planning process and coordinate with a client’s accountant, financial adviser or other professionals where appropriate.
Depending on the owner’s objectives, a succession plan may involve one or more approaches.
Ownership may be transferred through gifts, sales, trusts or estate planning.
Existing partners or shareholders may purchase the departing owner’s interest under a buy-sell agreement or negotiated transaction.
A management or employee transition may allow the company to remain with individuals already familiar with the business.
An outside sale may provide an owner with liquidity while transferring ownership to a new buyer.
In appropriate circumstances, an employee stock ownership plan may be considered as part of a business transition.
ESOPs involve complex legal, financial and tax considerations and require specialized analysis.
No single approach is appropriate for every company.
Business succession can involve estate planning, tax planning, ownership agreements and family considerations at the same time.
Drazen Rubin Law advises clients on business continuation and succession issues alongside estate planning, tax planning and related matters.
That broader perspective can be important when a transfer strategy affects both the company and the owner’s personal estate.
Franklin A. Drazen holds an advanced law degree in taxation.
Tax considerations may be relevant when a business is sold, gifted, transferred through an estate or restructured as part of a succession plan.
A succession plan should reflect:
The appropriate legal structure should be based on those circumstances rather than a standard template.
Drazen Rubin Law works with business owners throughout Connecticut on succession, estate, tax and related planning matters.
Our principal office is located in Milford.
We assist business owners with succession planning, buy-sell agreements, family business transitions, ownership transfers and related estate and tax planning.
Business owners in New Haven and throughout New Haven County may need succession planning when preparing for retirement, transferring a family business, changing ownership or planning for death or disability.
Drazen Rubin Law also assists business owners from Trumbull and throughout Fairfield County with succession and ownership-transition planning.
Our West Hartford location is available by appointment.
A business succession planning attorney helps owners prepare for the future transfer, sale or continuation of a business. Planning may involve buy-sell agreements, ownership transfers, family succession, estate planning, tax considerations, disability planning and the legal documents governing future ownership.
Business owners may benefit from beginning succession planning well before retirement or a planned sale. Earlier planning can provide more time to identify successors, review governing documents, evaluate tax considerations and coordinate the succession plan with the owner’s estate plan.
The result depends on the business structure, governing documents, ownership agreements and the owner’s estate plan. A business interest may pass through an estate or trust, but buy-sell agreements or transfer restrictions may affect who ultimately owns the business. The documents should be reviewed together.
A buy-sell agreement establishes rules for the transfer or purchase of an owner’s interest after events such as death, disability, retirement or departure from the business. It may address who can purchase the interest, how it is valued and how the purchase may be funded.
A family business may be transferred through gifts, sales, trusts, estate planning or a combination of strategies. The appropriate approach depends on the owner’s goals, the children’s involvement in the business, tax considerations and how other family members should be treated.
In some circumstances, owners may sell the company to key employees, management or an employee ownership structure. The legal, financing and tax issues should be evaluated before selecting a structure.
A business interest may be one of the owner’s largest assets. Estate-planning documents and business agreements should therefore be coordinated so that ownership-transfer provisions do not conflict with the owner’s will, trust or other estate-planning objectives.
It can. Gifts, sales, ownership transfers and estate transfers may create income, capital gains, gift, estate or other tax considerations. Tax consequences depend on the transaction and should be evaluated as part of the overall plan.
Business succession planning can help owners prepare for retirement, family transitions, ownership changes and unexpected events.
Whether you are considering transferring the business to family members, selling to a partner or employee, preparing for a third-party sale or reviewing what should happen if an owner dies or becomes disabled, Drazen Rubin Law can help you evaluate the legal issues and planning options involved.
Contact Drazen Rubin Law to Schedule a ConsultationMilford Office
245 Cherry Street
Milford, CT 06460
Phone: 203.877.7511
West Hartford — By Appointment Only
836 Farmington Avenue, Suite 136
West Hartford, CT 06119
The information on this page is provided for general informational purposes and is not legal or tax advice. Business, tax and estate-planning laws can change, and their application depends on the facts of each matter. Reviewing this website or contacting Drazen Rubin Law does not, by itself, create an attorney-client relationship. Consult qualified legal and tax professionals regarding your individual circumstances.
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