Succession planning aids business owners nearing retirement

On Behalf of Ezell Law Firm, LLC

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May 3, 2018

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Business Law

At some point, business owners in Louisiana will need to think about retirement. Stepping away from a business could involve selling it or passing the reins to a family member or other successor. Both situations require careful planning to consider issues such as retirement income and the needs and abilities of heirs.

As a first step, an owner should evaluate the willingness and availability of a potential successor. If there is an heir capable of running the company, then the owner could prepare a transitional agreement. This contract will phase in the new primary owner and establish the terms for how the business will provide retirement income to the former operator. In the absence of a successor, an owner would consider looking for a buyer. The proceeds would then fund a retirement.

Because the sale of a business could produce immediate lump-sum proceeds, the seller might want to set up trusts to receive funds. These trusts could name children or grandchildren as beneficiaries. However, trusts for this purpose should be created prior to the completion of a business sale.

Those looking to limit taxation when passing wealth to heirs could consider a trust strategy. Trusts also have the ability to impose rules on the distribution of assets to heirs. Delayed distributions or installment payments could represent prudent ideas when directing assets to people who might not handle the money appropriately.

A person engaged in business succession planning might benefit from legal advice. An attorney who practices business law could provide insights about structuring the sale of a business. Issues such as a buyer asking the seller to offer indemnities might be addressed by an attorney during negotiations.