What You’ll Learn

Succession and Continuation Planning

If the future of your business depends heavily on your — or a key person’s — individual skills and expertise, identifying and training a successor well in advance is critical. Key person risks such as death, disability, or departure can jeopardize business continuity, and strategies such as key person life and disability insurance, deferred compensation, and generous retirement benefits can help mitigate them. The checklist also addresses family succession considerations, including how a transfer to children may affect the equitableness of your estate and the interests of heirs who are not involved in the business.

Business Valuation and Appraisal

Getting an accurate valuation requires resolving pending liabilities, normalizing expenses that are above or below market rates, and accounting for revenue concentration risk if a small number of clients drive a large share of revenue. Hiring the right outside experts — valuation specialists, business appraisers, accountants, and attorneys — and “tidying up” the balance sheet before the process begins can meaningfully improve your outcome. Assets you wish to retain must also be carefully evaluated for their impact on sale price and buyer interest.

Sale and Disposition Strategy

Whether you are considering an installment sale, a sale to an ESOP, a family transfer, or a third-party transaction, each approach has distinct tax and cash flow implications. Installment sales can spread income across lower tax brackets, while an ESOP sale for C-Corp owners can defer capital gains. This section also highlights the risk of making rushed decisions under emotional or financial pressure, and the value of having your business “sale-ready” as a contingency plan even if you are not actively planning to exit.

Tax Planning Around the Sale

The sale of a business can significantly elevate your income in the year of the transaction, triggering AGI/MAGI-sensitive impacts such as IRMAA surcharges, Social Security taxation, and the 3.8% Net Investment Income Tax. Strategies such as loss harvesting, charitable deductions, and installment sales can reduce the tax impact. C-Corp owners should also review whether shares qualify for qualified small business stock treatment, which can exclude a significant portion of gain from tax.

Buy-Sell Agreements and Estate Considerations

A buy-sell agreement is a foundational tool for ensuring a fair and orderly transition of ownership, and choosing the right approach — entity-owned, cross-purchase, or hybrid — depends on factors including the number of owners, their relative ages and health classifications, and cost basis considerations. If your business value creates an estate tax concern for heirs, strategies such as gifting non-controlling interests using valuation discounts through a family limited partnership may be appropriate. Life insurance can also address estate illiquidity if other funding strategies fall short.