Business Successions

Protecting and transitioning your family’s business

Estate Plan & Maryland Business Succession Lawyer

Business Successions – Don’t Throw Away Your Life’s Work

As the owner of a business, you dedicated countless hours, hard work, and investments to grow your business and provide a better future for your family.

You want your business to continue succeeding if you step away, even if only temporary. A Maryland Lawyer specializing in Business Successions will help you put a plan in place to ensure its and your family’s continuing success.

Companies that do not plan for a transition fail at a much higher rate than those assuming things will just fall into place. Business Succession attorneys guide you as you create your plan to cover the many likely scenarios that can lead to temporary and permanent changes to management and owners.

Why do I need business succession planning for my Maryland company?

Small businesses make up a tremendous portion of our economy. Unfortunately, most small businesses do not survive to the next generation. Even very successful businesses can fail or sell for amounts far less than their true value.

If you do not intend to sell the business, you may still feel obligated to those you serve and your employees to make sure the business continues.

Business succession planning can ensure your company has a fighting chance to survive and that you and your family receive its true and highest value if sold.

Facts and law attorneys analyze for succession planning

If you own a Maryland business, there will be several questions you need to address for your planning:

  • Would your family be better selling the business or remaining its owner?
  • Will family members be capable of taking on your responsibilities in your absence?
  • If those currently involved cannot replace all of your current roles and responsibilities, does the business create enough income to support advisors or paid managers?
  • Do want or need to retire and count on your business funding your retirement?
  • Do you have a timeline on when you want to sell the business or exit?
  • Do you know of any financial, legal, or tax issues that may affect its future or its sale?

The above questions may not give the exact answers to a smooth transition, but can certainly give your Maryland business planning attorney an idea of the direction you want and obstacles in the way.

How does a Maryland business succession transfer happen?

The most challenging part of a business succession relates to the planning itself. Your Maryland business attorney will help you choose the right owners and managers, the best tax plan, and the best options available to receive payments and make a successful transition. The legal transfer of the business itself usually takes one of the following forms:

  • The sale of corporate shares or LLC membership interests
  • The sale of the assets of the corporation or LLC
  • The merger of the corporation or LLC with another
  • The gifting or bequest of the shares, interests, or assets

A Maryland business and estate lawyer will use the above tools to implement the plan after considering the many moving parts that involve transferring even the most simple of businesses.

Dissolving the business may be an alternative. It’s not rare for business owners to only come to us when ready to retire. By then, the business may have seen better days or have little value without the owner’s continued involvement.

In such cases, we’ll try our best to wind down the business. We would pay company debts that would be the owner’s personal liabilities and then distribute its remaining assets. Having time to accomplish these things helps, so the earlier we implement the plan, the better.

Plan the details of a change of business owners

Business succession planning needs to address many factor to allow the business to transition successfully and give the current owners its fair value.

Many factors will come into play and the final and best plan can often require knowledge of business, taxes, and estate planning law. Experience as an attorney handling business successions in Maryland can be crucial.

Family as successor owners – Volunteers, anyone?

Having your child or children take over your business can come with many complications. While some kids jump at the chance of taking over the business, they may not have the experience or temperament to run a business. Others may be very well-suited but have chosen other career paths.

Uninvolved owners cannot manage some family-owned businesses. Some need constant owner attention. You must determine whether your family members have the passion and capability to run the business.

Sometimes family members can work together to run the business. But you must consider whether the business will create enough income to support those involved. If not, then we can become creative about employees hired or we can consider selling the business to its employees or those interested in owning and operating it.

It’s understandable to dreamt of the business being your legacy that provide for your family for generations. Sometimes, however, the best thing for your family may be to sell the business while it has value, rather than when it’s decline if the family cannot maintain it.

If you have multiple children and only one will continue with the business, your Maryland estate planning attorney will want to consider the best way to handle dividing your estate. While the business may have value, sometimes the value can be hard to determine. Are you giving them a thing of value or giving them a job?

You may have an appraisal so the value of your estate is appropriately determined. You may have assets outside the business to split everything evenly, but other times maybe the business is a substantial portion of your estate. That raises several issues as well:

  • Should you make the non-involved children part owners of the business?
  • Will sharing the business profits remove the incentive for the business to continue?
  • Can family dynamics and sibling rivalries cause conflicts between those involved?

You must consider each factor. Your Maryland estate lawyer may suggest you accumulate other assets your estate can give to the non-involved siblings or purchase life insurance to allow the estate to be divided. Understandably, the child continuing the family business often rejects being forced to have co-owners.

Plan for a new chief

You will need to determine who will take over the management responsibilities of the business. If this person already works for the company, then that job may be relatively simple.

If you plan to have a family member with little experience take over the business, begin preparing them for their future duties. You will want them to take part in the business so they become familiar with its workings.

You should take the time to let them learn about the business and the industry itself. You should begin compiling a list of supplier and customer contacts. Of course, you also want them to become familiar with the employees.

Plan business transfers long before retirement or death

While there are many ways to transfer the business, some factors will probably dictate the method we must use. The method of transferring the business depends significantly upon:

  • The new owners’ ability to finance the purchase of the business
  • The current owner’s need for cash
  • Whether the company must pay outstanding debts
  • The legal and tax consequences of the transfer
  • The current owner’s timeframe to retirement

A factor often out of the parties’ control is funding the business purchase. If the business has significant value, it may be difficult for your children or other potential buyers to purchase the business without financing.

The buyers cannot always qualify for loans. Even SBA loans may require the borrowers to have experience operating similar businesses. The business not having proper books and records, or sketchy income tax reporting, can affect the valuations needed for banks to lend funds.

If traditional financing isn’t possible, then seller financing may be possible unless company creditors would prevent it or if the current owner needs immediate cash.

Business owners making transfers to family

If you will transfer the business to your child at death, then you can use life insurance to equalize the amounts your other children receive from your estate.

If the business owner is not interested in being paid for your interests in the company, then you can simply gift partial interests in the business to your children. Gifting can use the annual gift tax exclusion (currently $15,000) to transfer portions of the business each year. You will need to have an appraisal done every couple of years.

To have annual gifting, you will need to assign shares or membership interests each year. Annual gifting can also reduce your Maryland estate taxes as well. Alternatively, the owner of the business can use their last will and testament or a trust to transfer the business to your children or other heirs. Your Maryland business and estate planning attorney will tell you the best choice.

Transfers for payment

Both corporations and LLC’s may use buy-sell agreement to transfer shares or interests in the company. A corporate buy-sell agreement, also known as a shareholder agreement, is separate from its bylaws. An LLC’s operating agreement will incorporate the buy-sell agreement.

The buy-sell agreement will state that if a member or shareholder wants to sell their interests, then some other person will have the right or obligation to buy it. Another shareholder or member usually has the right to buy. The buy-sell agreement can describe the circumstances where a sale is required, such as retirement, death, or disability. It will often state a way of determining the value of the interests in the company and the timeframe in which it will need to be purchased.

Buy-sell agreements can relieve a lot of the stress business partners may have should a partner suddenly pass away or some other event occur. If the parties agree, the company or the individual can also purchase life insurance on the lives of the partners and use the life insurance to buy the partner’s interests.

Tax planning services for Maryland business successions

Business transfers can involve income taxes, local transfer taxes, and federal and state estate and gift taxes. Your tax attorney can assist you with transferring the business in the most tax efficient manner.

If the business is to be sold, then there will be income tax considerations. The seller usually receives income that’s considered capital gains. But there can also be some income that’s taxed at ordinary income tax rates. Some assets you depreciated in the past will now create recapture income, and the IS will tax it at higher rates.

To avoid income taxes on the sale of the business, many will choose to just hold on to the business until death. By doing so, the assets will receive a stepped-up basis and eliminate income taxes due from the sale.

Planning business successions with family legal issues

If you plan to have family become the new owners of the business, then their personal creditor and legal issues can complicate matters.

You the business interests of a family member held in trust if the family member has creditor or marital issues. The last thing you would want is for your life’s work to become the property of your child’s former spouse.

While most states do not consider family inheritances to be marital or community property, there could still be some commingling that confuses who has claims to the property.


Succession planning can help keep your family business from failing upon your exit. Passing your small business to a family member without training and putting a plan in place could set them up for failure and its consequences. What should be your legacy to them could be a drain on their finances and their careers. Proper planning can make your gift be a blessing and not a burden.

“When we purchased our business we had  Jeff help us. The guy selling it knew he was going to have tax issues from the sale, and he almost backed out. Jeff came up with a plan that worked out well for all of us. The deal went through and everyone walked away happy. We’d definitely recommend him.”

Dave S.


Words From Clients

Jeff was a great attorney to work with on the sale of our business. When problems popped up for the buyer to close, his manner kept everyone calm, both us and the buyer, and he came up with great solutions.  Jeff's experience definitely shows, and we'll be happy to work with him again.     - Elizabeth B.

Our CPA recommended Jeff to help us with our estate planning and transferring our business to our kids. Jeff was a friendly guy and understood the business and personal issues we were concerned about with giving the business to our kids. He came up with a great plan that reduced the taxes and made sure the business would stay open after we retired. We think our estate plan we made with Jeff will really help our family after we're gone. We are happy our CPA recommended him and with the work Jeff did for us. - Tom D. 

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