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How to Approach Business Succession with Estate Planning to Protect Your Legacy, Peace and Wealth

Originally published Feb. 2017; updated and republished Nov. 2021.

Business owners have generally made many sacrifices, taken risks and have worked hard for many years while building their business. Then comes time for all business owners to think about how create a Business Succession Plan that will create harmony, wealth and value for their family.

The best time to start thinking about Business Succession Planning is when it is not needed. Planning in advance, when there is no looming crisis, will produce the best result. Many business owners never get around to Business Succession Planning and when they die, become disabled, or want to retire, the business closes and is sold for pennies on the dollar.

How do smart business owners approach Business Succession Planning as part of proper Estate Planning?

Here are some general steps to think about.

Define Your Legacy Goals

First, consider whether your business will be viable to future generations and able to provide financial security and sustainability for them. Also consider whether or not selling your business fits in with your family's overall Estate Planning and retirement goals.

Do you have children interested and capable of taking over the business? Is your spouse involved in the business, and do they want to continue to be involved after you retire or after you should pass away?

Knowing how you want to provide for your family after you are gone, is the first step to determining your Business Succession Plan.

Assess Business Dynamics

Next, it's critical to understand the dynamics of your business now while you are here, and how those dynamics may shift after you are gone. Questions to consider:

  • Would your business continue to function well if you are not here to oversee?

  • Is there training and leadership preparation that needs to happen?

  • Do you have partners, other shareholders or key employees that might want to purchase your business?

  • Does your existing business documentation give your business partners the right to buy your share of the business when you die or become disabled?

  • Will your Estate be properly compensated in a buyout situation?

Have the Conversation with Your Potential Successors & Other Leadership or Family Members

After thinking through your family situation and your business dynamics, the next step is to communicate with your potential successors – whether they are your family, your business partners, or key employees.

Don't forget to ALSO have conversations with those close to you that will not be part of your business succession plan.

For family-owned businesses, one key mistake is to assume your children want to take over the business. Another mistake is to treat all children equally within the business. Making assumptions on either side, without communication may not lead to the results you want and could create unnecessary conflict.

Also, if business partners will be buying you out – how will the buyout be funded?

Hashing through these issues may take time– but the time spent is worth it in the long run.

Create the Transition Plan for Proper Estate Planning

Creating a successful Business Succession Plan requires the correct language in your Estate Planning documents and business formation documents.

Sometimes separate stand-alone agreements are needed between existing partners of a business as well. The simplicity and/or complexity of these documents are different for each situation. Sometimes language in a Will is all that is really needed, but other times sophisticated Trusts and additional business agreements are needed.

Proper Estate Planning includes consideration of a quality Business Succession Plan that keeps harmony and wealth within your family, protects the Legacy that you've worked so hard to build, and maintains value for your business. As a business owner, Estate Planning and Succession Planning should go hand-in-hand.

If you are a Business Owner and need to review your Estate Plan to include a Succession Plan for your business, or you need to set up a proper Estate Plan -- give Ritchie Law Office, Ltd. a call to schedule a consultation and discuss your options .


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Video #2: Peace of Mind Process

This video describes the the steps clients go through when they hire the Ritchie Law Office, Ltd. to create or update their Estate Plan.


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