A recent study of small businesses in the United States by U.S. Bank presented some troubling statistics when it came to small business succession.
More than half of all small businesses in the United States are owned by individuals over 55 years old, and the vast majority of business owners want to retire by the time they turn 65.
But they aren’t ready.
Overall, nearly 80 percent of business owners have started thinking about succession planning, but they aren’t taking action. Instead, almost half of all business owners don’t have a plan yet.
And they are struggling to put one together.
“Owners may want help navigating the succession planning process, as nearly two-thirds (62%) find the process of succession planning overwhelming. Well over half (56%) worry they won’t get a reasonable price for their business when it’s time to sell, and roughly half (53%) say they lack the proper resources or guidance to plan for the future of their business,” the report says.
These are obstacles that must be overcome, as only 40 percent of businesses survive after the founder leaves the company.
Frankly, it is not that difficult to develop a plan for succession in a business, as long as those involved have open communication with each other to share their goals and hopes for the company. Having this type of communication will help guide a legal and financial team to put the plan in place.
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.
What is the future of the company?
The first step of any succession plan is to decide what the future of the company could be and if a child really would like to take over the family business.
After all, a child may not enjoy the family business. They may want to pursue something else. And if that’s the case, succession planning for a business will look completely different.
For this article, we’ll assume that the child wants to take over the family business when the parent retires.
With that, it is time to discuss each other’s goals.
Does the child want to expand or try to franchise? Did the parent set a goal of taking the company public? Perhaps the parent wanted to reward the employees by creating more of a corporation where long-term employees received shares of the business. Or is everyone satisfied with remaining a small business that has one location and provides for everyone in the family?
Knowing these answers and coming to an agreement on that direction will help guide how a succession plan will take place over the coming years.
What other questions should be asked?
By undertaking an aggressive succession planning discussion, everyone with a stake in the business can discuss their vision and work towards achieving a consensus that everyone is comfortable with.
But to get to that point, there may be some uncomfortable questions that must be answered. Some of those questions include:
- Will the successor run the day-to-day operations of the business, or just be an owner with a professional management team?
- Are there other people, like siblings, employees, or other family members, who will be adversarial in the process?
- What will the role of the founder be after transferring ownership?
- Should an advisory or management board be formed to aid in decision-making?
- What professional skills should the successor have before moving into the owner’s position? For instance, should the successor work elsewhere to gain experience?
- What milestones are along the way to ensure the process is on track?
- What is a reasonable timeline to prepare for the transition and the timeline for the actual transition?
- What is the process for disagreements, such as mediation or a board vote?
- How do you communicate the plan with interested parties?
- When does the founder lose any ability to influence decisions?
Compensation is part of the succession plan
The questions above do not deal with money. Instead, they focus on the personal relationships and the operations of the business.
As with any transaction, issues can arise when the money part is discussed. It is important that everyone involved in succession understands the fiscal implications of the company during and after succession.
Many businesses require the succession to involve purchasing shares of the business. Even in a family-owned business, ownership can be through shares. It is important to agree on the number of shares available, the value of those shares, and how they can be purchased in a written contract that is reviewed on a regular basis.
Even without shares in a company, families must discuss any payments or dividends paid out to the existing family members. The company is part of any retirement plan, so having that agreed upon long before retirement is extremely helpful.
The financial aspects of succession can be complicated. They are covered by estate tax, gift tax and other legal ramifications that could get a business into trouble if not followed.
That’s why, even in a family business that has great communication skills, it is critical to work with attorneys to put together your plan with a sound legal footing to help prevent conflicts later.
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 September 24, 2025 by The Orlando Law Group
