Many small business owners spend much of their time strategizing and focusing on growth, but not everyone stops to think about what will happen to the operation once they decide to leave the picture for good. In PA, as well as across the U. S., it is not uncommon for small businesses and other operations to fall apart as soon as the primary owner takes his or her leave.
This is why, at Egbert & Barnes, P. C., we always stress the importance of implementing a business succession plan. This can help protect your legacy and help guarantee that your business will continue to succeed with or without your involvement.
Here are three of the most popular small business succession plans that you can implement in Pennsylvania.
Option 1: Private Annuities
This option lets you transfer the business to a family member or another individual, and entitles you to regular payments for the rest of your life. You can also include other individuals as recipients of these payments, providing a valuable safety net for loved ones. As this type of transfer is considered a sale rather than a gift, your assets will be shielded from any high transfer taxes.
Option 2: Family Limited Partnership
This is a different route that involves you turning your sole ownership of a business into a partnership, allowing you to continue managing the business. Over time, you gift limited partnership interests to family and loved ones and, like with a private annuity, this option lets you avoid high transfer taxes as well.
Option 3: Buy-sell Agreements
Buy-sell agreements are fairly straightforward, and are ideal for businesses with multiple partners. In essence, a buy-sell agreement is a legal document that outlines who you are selling your business to, for how much, and more. Commonly used to transfer ownership to business partners, this option also lets you set up a buy-sell agreement with unrelated third parties.
You will certainly want an experienced business attorney to help you draft this agreement, as an oversight or mistake could jeopardize your assets and expose you to tax violations and other financial risks.
Regardless of the route you choose to take, you should always inquire with a knowledgeable business law attorney in PA before moving forward with a business succession plan. Call us at Egbert & Barnes, P. C. today to learn more.