A significant generational transfer of wealth and businesses is underway in the United States and will continue over the next decade or so. That’s because more than 50 percent of small businesses are owned by someone over 55 years old.
And nearly all of them, according to a recent study by U.S. Bank, are planning on retiring by the time they are 65 years old.
For many of those businesses, it will be the end of the road, as only 30 percent of businesses survive to the second generation of ownership.
If a business owner wants their legacy to survive their retirement or death, they must take action early to put together the right plan for the business.
A succession plan can look very different for every business, as every business – and every owner – has unique situations.
One of the first questions to answer will be how to transfer ownership to the next generation of owners, whether it is family, employees or other partners. The four main ways to do that are to:
- Give the business to someone,
- Sell the business to someone,
- Include the business as an inheritance, or
- Place the business in a trust.
In this article, we’ll look at the advantages and disadvantages of each.
The attorneys at The Orlando Law Group specialize in helping businesses structure their succession planning in Orlando, Sanford, Winter Garden and Kissimmee and are here to help set up the tools and programs that can keep your company running for generations.
Giving the Business Away
At first glance, someone might wonder why a business owner would simply give the business away to someone. After all, the owner spent a lifetime building the business and should expect something in return.
However, there are plenty of reasons to give away the business, as that is often among the easiest ways to transfer ownership of a business.
For instance, giving away a business can be advantageous for estate taxes. The IRS allows individuals to transfer portions of their assets to their heirs. By gifting the business to the next generation of ownership over time, the amount of taxes they will need to pay will be lessened.
Plus, by gradually gifting ownership to heirs over the years, the next generation can learn how to run the business.
Of course, any business owner needs to fully understand the thresholds for the exemption for gifts, as the tax implications can be significant if the levels are exceeded.
It is also essential to have the process for gifting clearly laid out in a legal document. The document should have what happens after the gift and what happens if circumstances change while shares of the business are being transferred, like if the heir dies suddenly or decides not to be interested in the business after all.
Selling the business to heirs
An option for any business is to be sold. While many business sales are not part of succession planning, many businesses transfer ownership when heirs buy shares or purchase the business entirely.
The primary advantage of this to a business owner is that after the company sells, they reap the benefits financially throughout retirement.
This also ensures the heirs have put their own money into the business, giving them more at stake as they take over ownership. It’s not just a gift, but if the business fails, they lose their own money.
One of the best aspects of this type of succession plan is that it sets a fair market value for the IRS, helping eliminate any issues as to the value of the business.
Plus, the family members buying the business can purchase their shares over time, lessening the risk that comes with putting a large sum into a business.
Just like with a gift, there needs to be a legal framework for the sale that sets the price, the timeline, what happens with a default and more.
Establish a trust
We talked about the Limited Family Trust in an earlier article, but to recap, putting a business into a trust can be very advantageous in succession planning.
Here are just a few reasons:
- A trust helps avoid probate issues after the founder’s death.
- The transition can be private and faster.
- The owner can control how and when heirs receive ownership.
- A trust always provides asset protection from creditors or divorce.
- It helps avoid estate and gift taxes almost entirely.
That said, entering the business assets into a trust is a nearly permanent solution that becomes very difficult to unwind entirely. The terms of the transfer and ownership can be changed, however.
Trusts are always set up with an attorney to minimize any issues or scrutiny the trust might have.
Leave it in the will
What happens if the founder dies suddenly before they transfer ownership through a gradual sale or a gift? What happens if the founder wants to work and control the business long after retirement age?
It is essential that a business owner has specific instructions for succession in their will, even if the succession plan includes gifting or selling the company.
The will could expedite the sale to the heir or simply include the rest of the company not gifted over time to the heir. Of course, the will could also include instructions for the company to be sold and the proceeds be divided between the heirs.
However, there are issues with a succession plan solely including language in a will and nothing else. After all, depending on the value of the business, it could set off estate taxes. Additionally, if the will is ambiguous, it could result in the business’s ownership being subject to the probate process, potentially causing issues within the family.
That is why it is important to have an attorney look at all aspects of succession to reduce the possibility of legal actions after the founder’s death.
The attorneys at The Orlando Law Group help with all types of legal issues for business owners and individuals in Orlando, Waterford Lakes, Altamonte Springs, Winter Garden, Lake Nona, St. Cloud, Kissimmee, and throughout Central Florida.
If you have questions about anything discussed in this article or other legal matters, give our office a call at 407-512-4394 or fill out our online contact form to schedule a consultation to discuss your case. We have an office conveniently located at 12301 Lake Underhill Rd, Suite 213, Orlando, FL 32828, as well as offices in Seminole, Osceola and West Orange counties to assist you.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.
Last Updated on October 7, 2025 by The Orlando Law Group
