Succession planning is important for business owners in Florida and throughout the country. This can be true whether an owner plans to sell a company or transfer it after death. There are multiple ways in which a business can be sold. The first method is to sell it outright for cash or assets. If the company is sold for fair market value, there is no need to pay gift or estate tax.

Another option is to use a buy-sell agreement. This type of arrangement sees a person or group of people buy a company after a predetermined event such as the current owner’s death. One potential downside is that the company can’t be sold or otherwise downsized without the permission of the future buyer. Self-cancelling installment notes may provide a novel way to sell a business and engage in estate planning at the same time.

The buyer will make payments under the terms of a promissory note throughout the owner’s lifetime. Once the owner dies, future payments are cancelled. This results in no gift or estate taxes owed, but it also provides the owner with a secured interest in the company while alive. Companies can also be transferred to a limited family partnership, and portions of the business are gifted to family members over time.

Engaging in business succession planning as soon as possible may avoid potentially negative outcomes if a business owner dies or retires suddenly. The succession plan will ideally consider whether the company should be sold or transferred and who should acquire it. It may also be a good idea to consider the structure of the sale or transfer to minimize taxes owed as a result. An attorney may help with some or all of the aspects of a succession plan.