Business Succession Planning: How to Ensure Your Business Thrives After You’re Gone
One of the most pressing yet often overlooked aspects of long-term business health is succession planning. If you own a business, you’ve likely poured your time, passion, and hard work into making it successful. But have you thought about what happens to your business when you're no longer around to run it?
At Goldstein Mauer PLLC, we provide estate planning services to clients in New York City, New York. Today, we want to walk you through why business succession planning is essential, how to approach it strategically, and the tools available to make sure your business continues to thrive long after you're gone.
Why Business Succession Planning Matters
Let’s start with the “why.” Many business owners believe that succession will happen naturally. Maybe you expect your children to take over, or a trusted employee to step in. But without a formal plan, these assumptions can quickly fall apart. Here’s what can happen without a succession plan:
Family members may argue over ownership or direction.
The business could suffer a drop in value due to uncertainty or disruption.
Key employees might leave if the future seems unstable.
Tax consequences could significantly erode the business’s value.
Your legacy could be lost altogether.
By creating a comprehensive business succession plan, you can allow for continuity, preserve value, protect your loved ones, and solidify your legacy. If you need help creating a business succession plan to make sure that your legacy is safe, consider working with one of our estate planning attorneys at Goldstein Mauer PLLC.
The Building Blocks of a Succession Plan
Succession planning is more than just choosing someone to take your place. It involves legal, financial, and operational considerations. There are several core elements of a solid plan that are important ot keep in mind as you make your business succession plan. Here are the elements you should be sure to include in your plan:
Identify Your Goals
Before making decisions, you must identify what you truly want for your business. Ask yourself if you want to keep the business in the family, or if you’d prefer to sell it to a third party. Are you planning to retire, or is your plan being made for an unexpected event, such as death or disability? Your answers to these questions will shape the structure of your plan.
Choose a Successor (or Successors)
If you intend to keep your business running within the family or among current employees, you’ll need to designate a successor. This is often the hardest part for business owners. You might feel torn between children or uncertain whether a key employee is truly ready. There are a few things to consider as you make this choice:
Competence: Does this person have the skills, experience, and temperament to lead?
Interest: Do they actually want to take over?
Timing: Are they ready now, or will they need mentorship and training?
Sometimes the best option isn’t a family member. Rather, it could be a business partner, a co-founder, or a trusted employee. When you’re making this decision, it can be helpful to consult with an estate planning attorney for advice. Reach out to our firm at Goldstein Mauer PLLC to speak with one of our experienced attorneys.
Establish a Timeline
Succession doesn’t happen overnight. It’s a process that often takes years of planning. Whether you're planning to retire or just want to be prepared in case of an emergency, setting a clear timeline helps everyone stay on track. Some owners choose to gradually step back, handing off responsibilities in phases. This can ease the transition and allow for a smoother handoff.
Develop an Operational Transition Strategy
Your successor will need more than a title - they’ll need a roadmap. That’s why it’s important to document key operations, relationships, and decision-making processes. Your transition plan should include organizational charts, job descriptions, contact information for clients and vendors, and access to financials, key documents, and internal policies and procedures.
Create a Buy-Sell Agreement
If you co-own your business with a partner, you’ll need a buy-sell agreement. This is a legally binding contract that outlines what happens to an owner’s interest in the business if they die, retire, or become disabled. These are crucial documents for individuals who co-own a business. Buy-sell agreements can:
Define how ownership shares are valued
Specify who can buy an interest in the business
Prevent unwanted third parties from becoming owners
Provide funding mechanisms (like life insurance)
A buy-sell agreement is one of the most important tools in a well-crafted succession plan, especially when dealing with multiple stakeholders. Don’t attempt to work through this plan on your own; instead, consult with a reliable estate planning attorney with experience in business succession planning.
Tax Planning
Succession plans can have major tax implications for your estate, your heirs, and the business itself. That’s why working with an estate planning attorney and a CPA is critical. When you choose one of our lawyers at Goldstein Mauer PLLC, you’ll receive excellent service from experienced professionals. Some questions to consider when considering tax implications:
Will the value of your business trigger estate taxes?
How will your successor fund a buyout?
Can you gift shares now to reduce future tax liability?
With proactive planning, you can minimize the tax burden and preserve more of your business’s value for the next generation. Reach out to our firm today to get started working with one of our attorneys on creating a business succession plan that takes all elements into consideration - including tax implications.
Communicate the Plan
Once your plan is in place, don’t keep it a secret. While some details may need to remain confidential, it's important to communicate key aspects of the plan to stakeholders, especially family members and potential successors. Clear communication reduces misunderstandings, sets expectations, and makes sure everyone is on the same page.
Common Succession Planning Mistakes to Avoid
We’ve seen many well-intentioned business owners make critical errors in succession planning. Whether due to procrastination, emotional decisions, or lack of proper guidance, these mistakes can jeopardize the future of a business. Here are some of the most common mistakes and how to avoid them:
Waiting Too Long
The biggest and most frequent mistake is simply waiting too long to start. When you delay planning, you limit your options, reduce your successor’s preparation time, and increase the risk of business disruption. By starting early, you give yourself time to evaluate successors, implement tax strategies, train key personnel, and allow for a smooth transition.
Choosing the Wrong Successor
Selecting a successor is an emotionally charged decision, especially in family businesses. It’s common for business owners to feel pressure to choose a child or relative out of a sense of obligation, rather than based on merit or genuine interest. Unfortunately, this can lead to poor leadership, internal conflict, and the eventual decline of the business.
A good successor should have a clear understanding of the company’s operations, share your values and vision, and be capable of making tough decisions. It’s also wise to evaluate potential successors over time, through mentorship, trial responsibilities, or leadership training, before committing to a final decision.
Failing to Update the Plan
A succession plan should never be set in stone. As your business grows and changes, your plan needs to evolve along with it. Key personnel may leave, market conditions may shift, new business partners might come on board, and family dynamics can change dramatically over time. If your plan doesn't reflect these changes, it can quickly become outdated or even harmful.
Contact a Professional Estate Planning Attorney Today
You’ve built something valuable. Whether it’s a company that supports your family, employs others, or contributes to your community, your business matters. Don’t let that legacy disappear because of a lack of planning. At Goldstein Mauer PLLC, we serve clients throughout New York City, New York. If you’re ready to start your business succession planning journey, reach out to us today to schedule a consultation.
