Business Succession Planning

Business succession planning often is considered simply an
estate planning issue, but for your business succession plan to
be effective, all relevant factors – business planning, estate
planning and income tax planning – must be considered and
coordinated. In addition, documents must be drafted to
implement your business succession plan. NDHA performs all
these functions for you.

In the course of developing your business succession plan, NDHA considers:

  • What is the type of entity and how is it classified for federal income tax purposes? This is important because it affects what documents are required, the income tax consequences of the transaction and who will purchase the equity interests.
  • What events will trigger a buy-out of an equity holder? How will the buy-out be funded and over what period of time?
  • In the case of the death of an equity holder:
    • Will the buy-out be funded by insurance?
    • Are the wills of the equity holders consistent with the buy-out provisions so that the executor of a deceased equity holder will be required to sell such deceased equity holder’s interest?
  • What are the income tax consequences of a buy-out? For the buyer, the income tax consequences often determine whether the buyer is the entity or its equity holders.