Around 30% of organizations in the United States have implemented a formal succession plan, and it’s a topic that often stirs mixed emotions among business owners. Some are reluctant to imagine someone else at the helm of the business they’ve painstakingly built, while others may grapple with the perceived complexity of succession planning. If you find yourself in one of these categories, here are five crucial factors to contemplate when charting the course for the future of your closely held business.

Current Structure vs. What’s Ideal

As a business owner, it’s critical to have a crystal clear understanding of your existing ownership structure. This entails compiling a comprehensive roster of those currently involved with the company and their relationships to you as the owner. Questions to ponder: Is a non-relative currently overseeing the business you envisage passing down to your children or relatives? Are your children showing interest in actively participating or being passive stakeholders in the business? Are there any pressing concerns or issues at the present juncture? It’s also vital to evaluate if the current entity structure aligns with your long-term objectives.

What does your ideal future vision entail, and how does it differ from the existing structure? Does your Operating Agreement or Articles of Incorporation need an update to synchronize with this vision, or is a complete structural overhaul necessary? Understanding the merits and drawbacks of various entity structures (such as partnerships, S Corporations, C Corporations, and limited liability companies) can prove invaluable should restructuring be required.


Preparation for potential tax liabilities hinges on having a solid, up-to-date business valuation. The value of your business and the nature of the sale or disposition can potentially lead to federal and/or state income, estate, gift, or inheritance tax obligations. It’s crucial to bear in mind that the current lifetime federal estate tax exemption stands at $12.93 million per person, with an annual federal gift exemption of $17,000. [1] State-specific estate and/or inheritance tax implications will vary. Tax planning is pivotal when determining your preferred business entity. While tax liability shouldn’t be the sole determinant, it should always factor into your considerations. An exploration of the diverse tax consequences associated with each entity can guide you in selecting the structure most advantageous to your situation.


Even if your intention is to pass the family business on to your children, it’s a multifaceted endeavor that is more than a simple handover. Significant legal and administrative costs are likely to be involved in the transition, so it’s essential to determine whether your heirs will possess sufficient liquidity to cover these expenses. Additionally, remember that your children may be accountable for potential tax implications, and they must have the resources to meet these obligations. In cases where family members lack the necessary liquidity to take the reins of the business, you might explore problem-solving strategies like life insurance, debt financing, or equity financing.


Some business owners envision selling their business and channeling the proceeds into their retirement plan. Your choice of who you intend to sell the business to in the future significantly influences your retirement planning. Are you considering selling business shares to your children or grandchildren at a discounted rate, or do you envision selling to a third party at fair market value? Wealth Managers at Investra can conduct business valuations that give you clear insight into potential future growth, approximate the proceeds upon retirement, and establish investment timelines for you.

Communication With Your Family

Effective communication is the linchpin to facilitating a seamless transition and mitigating potential conflicts. (Click here to read: Why Transfers Fail and What It Takes For Them To Succeed.) Some family members are better equipped for management decisions, for whatever reason. Work together to delegate appropriately. While these conversations may not always be easy, they can help the next generation grasp your business strategy. Start thinking about who you want to succeed you and in what capacity and devise a plan for including your children in these discussions.

The Bottom Line:

Business exit planning is the cornerstone of financial health for both the business and its owner. The importance of having a well-structured exit plan cannot be overstated. By proactively addressing succession, liquidity, and tax considerations, Investra can help minimize risks and maximize the value of your business before during and after the transition. It also helps with having a seamless transfer of leadership and ownership, which is crucial for a business’s continued success. Moreover, having a solid exit plan in place provides peace of mind for the owner, allowing them to confidently navigate the next chapter of their life while preserving their hard-earned wealth.  Consult with one of our Exit Planning Specialists to embark on this journey today.


Important Disclosures:

The information in this article is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. This material was prepared by InVestra Financial Services. Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent, you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.


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