Business Succession Planning | Shah & Associates, P.C. Estate Planning & Elder Law Blog - Part 3
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Tips for Small Business Owners Who Have Ignored Their Succession Plans

January 12, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Many small business owners know the struggle of keeping track of multiple priorities working long hours and taking risks. However, even the most successful small business owners can be tempted to drag their feet when it comes to business succession planning. Some of the most common reasons for this process being skipped over are that succession planning is seen as emotionally difficult, time consuming, complex and expensive.shutterstock_62360050

Without a business succession plan, however, you are facing a lot of risk if you do someday hope to have your company survive you or to sell it for a fair price. There is no cookie cutter process you should approach for business succession planning. The amount of time spent in this process depends on the size of the business and the particular issues involved such as whether or not family members will be taking it on. Do not wait too long to get started, however, because this could prove problematic if something happens to you and you need to exit the business suddenly, having a business succession plan in place can help to avoid the challenges with a sudden departure.

Business Succession Planning: What Are the Values at Work?

January 5, 2016

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

A business reflects its owner, and a clear plan can keep that concern on the path that was chosen. Lack of a succession plan could morph the business into something different or leave it in the hands of someone who would not reflect the founder’s intent or attitude.shutterstock_110061932

The type of plan used will depend on whether the business is to be sold or kept until death or retirement. If the business to kept and passed along, use of an outside consultant can eliminate bias in the selection of a successor and that successor could be placed in a similar business to prepare for the future.

If the business is to be sold, there are many options; an outright sale, a buy-sell arrangement for a future date, a family limited partnership, or an annuity arrangement trading your business for a guaranteed lifetime income string.

Make sure you contact a New Jersey business succession planning attorney when you have questions about charting a successful path for your company. Planning ahead can prove to help answer some difficult questions.

Business Succession Planning is About More than a Check

December 23, 2015

Filed under: Business Succession Planning — Neel Shah @ 9:15 am

Forbes Asia recently interviewed a fast food entrepreneur in Hong Kong who shared insights into business succession that are universally applicable. Although family businesses account for 80% of the global economy, next to divorce and bereavement, succession may carry the greater stress. The letting go process for an owner can be a real psychological barrier. In any plan, family must come first, then business.shutterstock_123839953

The harmony, relationship quality and consensus is important for any person in planning a business succession. It is also important to consider a family assessment of ages, talents and wishes and this should be discussed in a transparent manner.

This could involve the creation of a family charter which contains defined policies and procedures like values and traditions. It should be kept in mind that psychologically, children may feel they can never step out of the parent’s shadow and may need to pursue their own dreams outside the business.

Business Succession Planning: Challenges of Selling the Family Business

December 8, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Selling a family business, whether it’s due to lack of succession options, estate issues or the need for liquidity can cause problems as a result of sudden liquid wealth.

Passing on the family business also carries with it needs worthy of great consideration and counsel from trusted advisors. Whether to travel, work or pursue hobbies or philanthropy, the business structure within the family operated will be gone if the business is passed on to someone else and this can be an emotional struggle.shutterstock_321333917

Planning for all life elements should be pursued as an integrated process with defined goals. Investment has to move from the business into diversified streams with clear communication with all family members as far as the consequences of the sale. An individual thinking about passing on the family business should also be aware of lifestyle creep which means increasing spending just because the funds are available to do so.

Business Succession: Twilight of the Boomers

December 1, 2015

Filed under: Business Succession Planning — Neel Shah @ 9:15 am

As baby boomers age into their 60s and 70s, more of them are preparing to leave their businesses behind. In order to do this, baby boomers have to recognize that a lead time of at least 3-5 years is actually their best friend in the planning process. This allows you time to carefully consider all of your options and to put the steps in place to achieve success with passing on the business to someone else. Ownership succession in terms of selling outright frees the owner from future risk and locks in financial obligation of the buyer, providing cash to pursue future goals for the baby boomer.shutterstock_82215202

Management succession, which allows the individual to retain some level of ownership and risk, allows for transition into and through management a family and employees seeking the best positions moving forward. The key is that a long range planning option can help to maintain business value, improve employee confidence and cement a family legacy by providing financial opportunity for philanthropy.

Why is Business Succession Planning an Ounce of Prevention?

November 23, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am


A person given a one-third chance of survival in life is alerted to this fact. But in many cases a person whose business faces the same chances will prefer to deal with the matter later on down the road.shutterstock_320674358

The key in this situation is a balance between business Goals and family relationships as well as balancing emotion and logic.

In the process of conducting business succession planning you should identify the objective first. Is it to sell the business? Is it to give the business to someone? When will this take place? And who will be the key parties involved. After this initial need has been accomplished, it is time to consider the financial need. Does the retiree need business proceeds on which to live and if so, how much and how will these be paid out? And finally, key employees should be kept for the purposes of continuity and employment agreements can aid in this situation, building incentives and using non-compete agreements for structure.

Is Business Succession Planning a Question of Fairness?

November 3, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

It’s very likely that a business could turn out to be the largest asset held within a family. But fairness of how to deal with this in terms of succession planning can arise as an issue if all family members are not involved in the conversation in one way or another. Especially in the event that the business is sold, non-members could be unhappy if they feel as though their distribution is smaller. There are also challenges if full and equal distribution is made because this can place a burden on members active within the business.shutterstock_312773633

One way to handle this situation and to even the playing field is to use life insurance allowing for a gradual buy out of non-members. And this also eliminates concerns associated with managing equal distributions. One of the most important ways to handle this challenge is to sit down with all family members and discuss the potential future of the business.

A business owner could be under the impression that one or more of his children or other relatives are interested in continuing on with the business. But a conversation brings this issue front and center and gives clarity to any concerns. In addition to hosting the initial conversation about how to handle business succession planning, it’s also important for the business to be valued accurately before any distributions are made considering depreciating factors like the lack of marketability.   Contact us today to learn more about business succession planning.

Business Succession: Tying a Plan to Your Vision

October 27, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Setting a course for the future of your business involves looking well into the future. Difficulties can often act to narrow and constrict your long-term plans, and focus can easily turn to quarterly results and reactions if you are not careful. shutterstock_254049055

When thinking about the future of your business, you need to take time to zoom out from this smaller picture into the bigger one so that focus is once again concentrated on how to grow as well as the people to help accomplish these goals. A wide focus helps receive buy-in from the staff of your organization in understanding that personal decisions will influence outcomes.

Some key questions to consider during this process involve which people may be intending to retire in the next five years, what people are already in the pipeline for future development, and whether promotions would generate position gaps within your company. Putting together a business succession plan should only be done under the experience of an estate planning attorney.

Ready to plan ahead? Contact us for more information.

How an Unexpected Departure Can Impact Business Succession Planning

September 1, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

There are lessons to be learned from the sudden death of David Roth, general director of the Kentucky Opera. Unfortunately, families and business around the country suffer when an unexpected departure raises many questions about the future of a company or entity. Although it can be frustrating to realize the challenges of handling this situation too late, such an event highlights the value of business succession planning in the present for any company. shutterstock_286436105

The first step in such a process is to recognize the loss and begin the communication process as early as possible. Stakeholders should be made aware of potential outcomes of the loss of a key member of the company. Stakeholders might include employees, shareholders, or even donors depending on the structure of the organization. All relevant individuals should know that operations will continue as usual in the interim. From here, the next discussion should be about plans for moving forward and what permanent leadership might look like.

If you’re struggling with starting the conversation on succession planning, we can help get you thinking about key issues and questions to consider.

How to Start the Discussion on Succession Planning

August 25, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

In order to plan ahead for the future and reduce the possibility of problems down the line, you need to think about what you want to happen to your business. The most difficult part of this process is planning the initial conversation and avoiding any excuses or reasons to put this off. Business Succession0915

When you set aside the time to talk with relevant family members or stakeholders, do not let anyone convince you that the conversation should be pushed off or dealt with later. Once you make the commitment to think about the future of the company, stick to it.

It’s essential, though, that you do have buy-in from the people at the top of the company. Your current leaders should already be assuming key roles within the company and that they participate in the process of identifying additional talent and building the structures for the company to exchange hands in the future.

Finally, be sure to hold yourself accountable. As the figurehead, the responsibilities should trickle down to your other employees, but you must be willing to show that this is your commitment instead of just saying that it is. Outlining your goals in an official statement or your company’s strategic documents helps keep you on track with this. Ready to get started but not sure how? Contact us:

Probing Questions for Succession Planning

August 18, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

The prospect of planning ahead for retirement and the possible sale or transfer of a business raises a lot of questions. It is important to consider not only how succession planning affects you, but also how it will affect other stakeholders in the business and any future owners. Review these questions before putting together your business succession plan:

  • Can the business be continued with family members or other employees, with power gradually being given over to them?
  • Are there any other assets in place to help fund retirement outside of the sale of the business?
  • If there are other assets in place, how could the sale of the business supplement and contribute towards those?
  • If there are no other assets in place, is the business in a position to be sold? Do the analytics of the business indicate that there may be interested buyers or positive financial forecasts?
  • If the business will be sold, would the proceeds be sufficient enough to cover your retirement for the remainder of your life? i6CvhRaSJJpF9tl0uUGXDEtGNRFU5shuxQnMJSSZ4LM

All of these questions are important and worthwhile in your approach to business succession planning. Ready to get some help with this? Contact

Business Succession Advice: What to Know About the Unsolicited Offer

July 2, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

If someone comes to you seemingly out of the blue to make an offer on your business, tread carefully. Although this can seem exciting, you need to carefully vet this individual and determine whether it’s the right fit for your business.shutterstock_253802632

One of the biggest problems with the unsolicited offer is that it pulls attention away from running a company into selling one, because the offer of stepping away from routine and receiving a large sum of money can be very tempting. Large industry firms that make these offers could contact dozens of firms with the aim of never providing a price and instead stringing out the process long enough so as to receive a discount.

If you’re considering this unsolicited offer, be proactive. Request a confidentiality agreement and a clear letter of intent from the buyer. This is simply due diligence on your party. If the buyer balks at your requests, you can point this person to discuss future offers with your firm’s specialist on mergers and acquisitions. The remove yourself from the game without any further losses of time, energy, or personal information about your business. Contact us for more advice at

Why is Family Business Succession Planning So Difficult?

June 23, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Business succession planning is difficult to begin with, which is why so many people avoid doing it at all. That’s not a good approach, however, because poor planning could turn into a real problem down the road. When it comes to businesses owned by a family, it seems like this one area where multiple challenges make it harder than ever to have the planning conversation. shutterstock_143515135

There are many factors involved in why family business succession planning often takes a backseat. First of all, there’s a smaller pool of potential successors. Sibling rivalries can inflame arguments, especially when some siblings want to stick with the business and others want to move on after the parents have exited the company or passed away. Larger generational differences between stakeholders is another reason why it’s hard to figure out the future of a family business.

Finally, there’s a strong connection between family and work for anyone who works in the family business. Without proper care and planning, this can lead to more emotional conflicts at work and at home. That being said, you can minimize future conflicts by planning ahead and thinking especially about how you want your legacy to be carried on. Need help? Email

What to Do When You Need to Exit Your Small Business Quickly

June 15, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Certainly, planning ahead for a small business exit is a wise decision, but it’s not always an option. Sometimes, business owners need a quick exit for one reason or another, and putting forth a quick plan of action can be crucial to following through properly. 5HeZmh6ZnnsYGxPbT0bM2RzZFsLirU3oUPu_Hs2PNxM

New research from reveals that the time to sell a business decreased by 23 percent recently, from 200 days to only 153 during the final quarter of 2014. Five months, though, may be too long for some business owners who need immediate action.

In case this describes your situation, here are five steps you can take for immediate action to sell your business, according to

  1. Contact potential buyers. As a business owner, you might already know interested parties.
  2. Incorporate a business partner. A business partner could help manage portions of the business you’re not interested in, giving you more time to find the ideal buyer.
  3. Pass on the business to employees. Creating an Employee Stock Ownership Plan gives you more opportunities and helps you move forward a sale more quickly.
  4. Provide incentives. The more attractive you can make the sale opportunity, the more likely you are to sell it quickly.
  5. Liquidate assets. While this is certainly not going to be your first option, it is a potential one if you find you need to exit quickly without taking a huge financial hit.

Need help planning ahead or in crunch time with a business sale? Contact our offices today for a consultation.

Why You Need a Business Succession Plan

May 21, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

It’s so common for small business owners to love their work so much that they it might not even be on their radar to think about retirement. As a recent article points out, though, you might be tempted with an offer you can’t refuse at any point in your business. Are you prepared if someone offered you a buyout? shutterstock_129614795

Even if retirement is not on your radar right now, you should always be thinking about the long term. Since it could take several years to put a succession plan in place, here are five key steps to take to ensure you’ve thought about all the details big and small.

#1: Start Training a New Team or Manager

It’s never too soon to start the process of tapping the next round of talent.

#2: Document Your Plan

Contact your business succession planning expert to make this happen

#3: Consider Your Backup Plan

Simply put, things don’t always unfold the way that you expected. Make sure you’ve got a Plan B in place just in case.

#4: Hire the Right Accountant and Legal Team

Since your plan might evolve over time, make sure you’ve got a plan in place to get the right advice when you need it. Schedule regular checkins.

#5: Think About Your Own Exit

You’ve got to think ahead about the exit as well- so don’t focus on just team member actions. Consider how your life will change once you exit the business, and prepare yourself for the transition.

Thinking about business succession now? Contact us at

Business Succession: No One Size Fits All

May 14, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Although there are certainly trends in business succession, this doesn’t always mean that the general approach is the best one. Planning ahead and carefully considering the implications of any one choice is the best way to approach this delicate subject. shutterstock_133797656

In the past, it would have been assumed that it’s best to keep the business in the family by passing it along to the oldest child. While there are certainly situations where this is true, it doesn’t mean that it should be your default option. If you’ve seen the hit drama on Fox called Empire, you’ll recognize that succession planning is often more complex than you’ve expected. Communicating with your loved ones and determining their interests and talents is part of the equation, but don’t count on this being your only or best option in the process of succession planning.

In fact, 83% of business owners expect that the family will still own the business in 5 years. In reality, only one-third of them are right. Your future intent has to be clear when it comes to business succession planning. Factor in all the possible outcomes and the desires of the other stakeholders involved to make the best possible decision. If you’re ready to start the conversation about business succession planning, contact us at

Benefits of an Annual Business Protection/Continuity Planning Review

April 3, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 9:15 am

Business owners are continually focused on managing risks, expanding the company, and enhancing profitability. As your company grows, it’s especially important to look at your vulnerabilities on a yearly basis to evaluate the plans you already have in place as well as future plans you may need. canstockphoto8307303

One of the primary reasons to do this every year is that your tolerance for risks you’ve identified in the past may have shifted, opening your eyes to new challenges. There are a few key questions you can ask during this annual assessment for risks and vulnerabilities, including:

  • Have you taken any actions during the past year to reduce some common risks?
  • Have your risk environment changed due to alterations in your facility or surrounding location?
  • Has the environment changed such that previously identified “low risk” concerns should now be a higher priority?
  • Has the external environment altered to impact your profitability or existence, like new transportation types, regulations, or population changes?
  • Has the structure or size of your company changed such that you may want to reconsider the internal structure and the tax implications associated with it?
  • What challenges have you found yourself facing as a business owner, and can outside experts help you manage those challenges?

Business protection planning is an important part of being able to succeed over the long run. To meet with our planning specialists for your first annual review meeting, get on the calendar by reaching out to

Structuring Your Business Succession Plan With Taxes In Mind

March 16, 2015

Filed under: Business Planning,Business Succession Planning — Neel Shah @ 3:40 pm

If you feel overwhelmed or confused by the process of business succession planning, you’re not alone. In fact, this is a common challenge facing many of America’s business owners. To further complicate matters, many business owners are not informed about the possible tax implications of a succession plan they choose. This is why it’s so important to choose a business succession advisor who is familiar with the implications for both your business and your tax situation. shutterstock_223513792

One common mistake made in the process of business succession planning is to sell all or a portion of the stock to your children. This can have negative tax consequences that you didn’t realize when you put the plan into place. For example, if you use a stock purchase agreement or a stock redemption agreement that required insurance on the owner’s life in order to provide company stock to someone else, the IRS could collect estate taxes on that amount if you don’t structure everything with details in mind. While life insurance can be an important part of your overall estate planning, it might not be the most appropriate vehicle to pass on company stock to your children. A trust or other business succession planning strategy may be more aligned with your business needs while also taking into account the tax implications of such an action.

The bottom line is that you need a business succession planning advisor who is familiar with creating a comprehensive strategy aligned to your needs. Contact us today to learn more at

When LLC Members Pass Away: What Are Executor Rights?

September 18, 2014

Filed under: Business Law,Business Planning,Business Succession Planning,Estate Planning For Business Owners,LLCs — Tags: — Neel Shah @ 9:36 pm

A recent case highlights some of the questions surrounding the situation mentioned in the title. According to the default rule in New York, the death of a member doesn’t trigger a dissolution of the LLC unless the survivors vote to take action on dissolving.

There are a few important outcomes of this new default rule, known as 701b in the New York LLC law. First, executors only have limited powers in their ability to exercise member rights or to become members themselves. Second, family members who inherit a deceased member’s interests are not admitted for official membership unless those other members consent to this. Third, without such consent, the inheriting family member retains only economic interest, not management or voting powers. Finally, these individuals can be considered non-members and do not have any decision making authority when it comes to judicial dissolutions or mergers and consolidations.

One example of this rule in action is the Budis case. An executor-husband of his late wife had his case dismissed against other LLC members for lack of standing. The operating agreement stated that the death of a member was seen as a voluntary withdrawal, and the estate thus became an interest holder but not a member per se. The solution is to include something in the operating agreement stating that a family member or executor inheriting the deceased’s LLC interest should be treated as a member of the LLC with all rights and powers afforded to other LLC members. To learn more about protecting your interests in an LLC, contact us today or via phone at 732-521-9455

Family Business: Steps to a Viable Succession Plan For Your Family Business (Part 2)

July 16, 2014

Filed under: Business Law,Business Succession Planning,Family Business — Tags: , , — Neel Shah @ 4:29 pm

There is no doubt that working in a family business can be rewarding, but it might also come with some challenges. With regard to succession planning in particular, here are some of the top tips you need to consider when multiple relatives are coming to the same table on a family business.

Family Business: Steps to a Viable Succession Plan For Your Family Business (Part 2)
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  • Make clear goals and objectives. Getting everyone on the same page with where the business “is” and where it’s “headed” is not easy, but you can bring things full circle by thinking about common goals and visions.
  • Create a process for making decisions: Don’t rely on the way you have always done it as a family. You may need more formal structure and written explanations of how decisions are to be made. Don’t forget to factor in your methods for resolving disputes. This can save you time and hassle in the future.
  • Generate a comprehensive succession plan that determines active and non-active roles for family members, establishes successors, and determine if additional support for that successor will be required from other family members. Documenting everyone’s role makes it easier.
  • Have both a business and owner estate plan. Don’t forget one or the other, as they are both important in a family business. Think about minimizing taxes and protecting assets together.
  • Determine the most appropriate avenue for transition. There are numerous options for buyouts or agreements, and this is something you definitely want to discuss with an attorney.

To learn more about how we can help clients with proper succession planning for a family business, call us at 732-521-9455 or send an email to

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