The recent study of small businesses by U.S. Bank focused on succession planning for small businesses. As more than half of small business owners are less than 10 years from retiring, the group looked at how business owners were contemplating their business’s future.
It was no surprise that the most common answer is that business owners want their children to take over the family business, but it also showed that there are other options for business succession than just the immediate family.
Other choices included:
- Transition their business to a family member other than their children. (10 percent)
- Gift their business to someone when they retire. (10 percent)
- Sell their business to someone outside of their organization or family. (10 percent)
- Sell their business to a current colleague or business partner. (nine percent)
- Transition their business ownership to their employees. (eight percent)
- Dissolve their business when they retire. (seven percent)
Unfortunately, only 30 percent of small businesses survive after the founder ends their involvement in the business, showing the need to determine how to continue long before the need to transition arises.
But if the business owner doesn’t have children, or those children do not want to take over the business, there are options.
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.
Is there an outside buyer for the company?
One of the most common ways for a founder to transition out of a company is to sell the company to an outside buyer, whether it is a larger competitor or someone just looking to enter the business.
By finding an outside buyer, it could mean a significant cash infusion for the founder, or the deal could be structured to take place over a set period of time. The sale could include the founder keeping a minority position in the business, or the founder could just walk away.
A sale can be structured in many different ways, but there can be concerns when selling the business. For instance:
- How will the company’s operations and culture change?
- How will employees be treated after the sale?
- Will the company retain its name or take the new company’s name?
- What will the role of the founder be after the sale?
All of these are issues that should be outlined clearly in the terms of any sale contract for the business.
Is there an internal buyer for the company?
One of the keys to any successful and sustainable business is a strong management team and great employees.
When looking at succession planning for a business outside of the family, internal options could be the best option for keeping a business thriving after the founder leaves.
After all, internal options will have in-depth knowledge of how the company successfully operates, making the transition smoother. By selling to an internal option, the company culture could be maintained as the internal option was part of the team that established the culture. For employees, having a familiar face at the top of the organizational chart can help ease the concerns they have about a transition.
The internal options could be the founder’s partner. Partnerships in business are very common, and selling to a partner could be easy, as long as the partners work together toward a common goal. But even if a partnership has been difficult, the terms of the sale can help negotiate a path forward for all parties.
Another option could be someone in management, like a vice president, or the entire management team. Just like with a partner, the terms of the deal and the future of the company need to be negotiated and clearly outlined.
One of the advantages of this type of sale is that it can also be done over time, so the internal buyers can fully understand the scope of the business and learn all aspects of running the business.
Create an Employee Stock Option Plan
We’ll discuss more about an Employee Stock Option Plan in another article, but if a business is profitable and has a group of long-term employees, providing an option for the employees to take over without buying shares, and ESOP may be a good option.
In this transaction, a trust is created and takes on debt to pay the founder for the business. After that transaction, shares of the company are created and distributed to employees, generally based on a formula that includes items such as seniority, salary and more.
The debt is repaid by the company, and any profits are then distributed to employees who have shares in the company.
One of the primary reasons for an ESOP is that it gives employees an opportunity to truly be invested in the company’s future, giving them a higher motivation to perform. It also helps keep the operations and culture of the company intact as it moves to the future.
An ESOP is a complicated transaction, so it is important to work with an experienced attorney to ensure it is done properly and with protections for everyone involved.
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
