Business Transactions

A “business transaction” is an event involving an exchange of goods, money, or services between two or more parties. The transaction can be a one-time event, or a long-lasting service contract extending over many years. The business transacted can be between two parties engaged in business for their mutual benefit, or between a business entity and a customer. By definition, a “business transaction” is an event or activity that can be measured in terms of money and which affects the financial position or operations of a business entity.

We can assist business owners to successfully plan for and document a wide variety of “business transactions,” including both “revenue transactions,” involving the day to day activities and operation of a business, and “capital transactions,” involving long term objectives such as business formation and investment, growing an existing business, borrowing cash from other entities for business use, or purchase of fixed assets for use in a business.

We can assist you in: (a) selecting and forming the proper business entity for your needs, (b) creating appropriate contracts for ownership and operation of your business, (c) instructing you in procedures for the ongoing maintenance of your business entity, and (d) preparing an eventual ‘exit plan’ should you become disabled, die, or wish to retire. We also collaborate with experienced human resources and labor law professionals when the need for their services is presented.

If you would like further information regarding a “business transaction” matter, please contact us to schedule a complimentary consultation.

Business Succession Planning

The Need for Business Succession Planning

Although about 90% of all United States businesses are family owned or controlled, only about 30% of them pass successfully to the second generation, and even fewer – about 15% – are passed to the third. Morris, Williams, Allen & Avila, Correlates of Success in Family Business Transitions, 12 J of Bus Venturing 385 (Sept. 1997).

Whether you want to ensure the value and survival of your business for the next generation, or for your business partners or “key employees,” or to prepare your business for eventual sale to a third party, a well-designed “business succession plan” will help you beat the odds that your business will simply fall apart after you are no longer there. The best time to create your “business succession plan” is when you start your business, but the truth is most closely-held business owners fail to create any plan, either when the business is started or later. In most cases, if you wait until you need a “business succession plan” to create one, it will already be too late.

We assist family-owned and closely-held business owners craft “business succession plans” which address a wide variety of issues. For example:

• You have begun planning for retirement and realize that the best chance of obtaining the maximum value for your business is to sell the business to a group of heirs, co-owners and/or key employees who have a vested interest in continuing to operate it;
• You have had a personal experience which impacts your ability to continue the business (e.g., you have an accident, heart attack, or other major medical issues);
• A competitor or supplier offers to buy out your business;
• Co-owners and/or key employees become concerned about their future in your business; or
• You receive professional advice, e.g., from
  • An estate planning attorney during the process of preparing wills and trusts;
  • A business attorney during the course of planning and implementing a major transaction; or
  • An accountant or an insurance or financial adviser during a periodic analysis including recommendations to the owner as to the needs of the business.

 The Four Basic Reasons for Business Succession Planning

If you own a business, there are four basic reasons for you to do business succession planning:

(1)   To Provide Liquidity. A principal reason to establish a “business succession plan” is to provide liquidity and generate cash flow to fund the retirement of the owners. If the owner’s objective is to transfer ownership to family members, a systematic plan of gifts and sale of stock in the family business from the owners to the successors over a period of years will benefit both generations. Without a plan in place, the unexpected death or disability of an owner might dramatically diminish the value of a business and the ability of successors to sustain it for the time necessary to acquire ownership and control.

(2)   To Minimize the Impact of Transfer Taxes. Although the risk or the forced sale of your business to raise funds to pay gift or estate taxes has been substantially reduced by extreme increases in gift and estate tax exemptions ($11.4 million for individuals and $22.8 million for married couples in 2019), transfer tax considerations remain significant for business owners whose total estate values exceed the exemption amounts. Careful business succession planning will minimize the impact of these transfer taxes in most cases.

(3)  To Provide for Continuation of the Business. As a business owner, you should designate persons to succeed as managers, officers, or directors of your business in the event of your death or disability. Even if you decide that the best option is to sell to an outsider, you still need continuity planning to cover the possibility that something might happen to you in the interim. Your “business succession plan” can articulate who will succeed to positions of leadership and control of your business in your absence, and help ensure continuity of your business whether it is to be continued by designated successors or sold to a third party.

(4)  To Provide for Family Members. Your “business succession plan” can also provide for your family members in at least two ways. First, your plan can provide for the appropriate level of continuing financial support for your surviving spouse and other family members. Second, your plan can provide the terms and conditions under which family members might take over the business; allowing those family members who have both the interest, and the requisite knowledge, skill, aptitude, and experience, to effectively continue the business.

The Role of the Business Succession Planning Attorney

Your “business succession plan” begins with a systematic review of your business and personal needs and objectives. Your business has its own unique and distinctive characteristics, and combined with your family circumstances will inform the ideas and objectives you have for your business. The review process will often raise issues you have not previously considered and may even modify the precepts on which you initiated the planning process.

The second step to ensure a successful outcome is to work with your attorney to assemble the right team of specialists early in the planning process. Successful business succession planning may require collaboration between your attorneys, accountants, financial and insurance advisers, or even a business appraiser.

If you would like further information regarding your “business succession plan,” please contact us to schedule a complimentary consultation.