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Business Succession Planning


  • Who will be the next owner of my business?
  • Who will be the next leader?
  • How will I meet my income needs as I decrease my involvement in my business?
  • How can I create financial independence outside of my business?
  • How should I plan for my spouse’s security?
  • What are the tax ramifications of my business succession plan?
  • What estate planning techniques can I use to reduce estate taxes that are consistent with my objectives?
  • Where will my family get the cash needed to pay the unavoidable estate taxes?
  • How should I treat the children who are active in the business and those who are not?
  • What makes sense for my children’s spouses?

Often these difficult issues are too emotional and uncomfortable for parties directly involved to discuss openly, so the business owner often becomes isolated in the decision-making process.

Mac Advisory Group can help guide you through a process that emphasizes the integration of personal and business objectives. We will meet with the key people involved and discuss personal and company goals, and then help the group reach a well-considered resolution to every issue.

Our role at Mac Advisory Group is to help you manage these issues effectively by adding experience and professional objectivity to the process. We have been helping families design comprehensive business succession plans for over 40 years and we are well versed in all the issues that critically affect family businesses. As an objective third-party, we can serve as a buffer, which is especially useful in cases where there is confusion; or the potential for conflict among family members; or between a family member and a loyal employee; to make recommendations that you may feel uncomfortable articulating or making yourself.

We believe every successful business owner has three plans. The plan you think you have, the plan you actually have, and the plan you would like to have. Our job is to help you make the plan you would like to have a reality - and keep it that way. Our breath of knowledge and experience in what makes family businesses unique helps us guide you - in concert with your professional advisors - to a sound plan for a smooth succession.

Business Succession Planning

The death of a partner or major stockholder in a business can have devastating effects on both the business and the deceased partner’s surviving family.  The business is concerned with gaining control of the deceased partner’s interest at a fair price so that it can continue operations without interference from the surviving family members.  The family members are most concerned with receiving as much money as possible for their interest in the business and for capital that may be needed for estate settlement purposes.

The Need for a Written Agreement

Absent a written agreement, the competing interests of the business and the family members could lead to major conflicts, litigation and possibly the forced liquidation of the business.  A buy-sell agreement can ensure that the business interest of the deceased partner will transfer in an orderly manner to the benefit and satisfaction of all parties.  With a buy-sell agreement in place, the stability of the business for it clients, employees and investors (or creditors) is more assured.

Key elements of a buy-sell agreement include a mutually agreeable sales price and terms of the sale.  The agreement needs to be funded in order to ensure that the capital is available at the time of the death of a partner.  Life insurance provides a cost effective means of creating the capital necessary to buy out the interests of the family and establish a reserve for the business to use  to continue its operations.

Types of Business Owner Buy-Sell Arrangements

Entity Plan: Under this arrangement, used when there are multiple owners, each of the business owners has a separate agreement with the corporation or partnership as the entity.  The entity, per the buy-sell agreement, will buy the deceased partner’s interest at his or her death. 

Cross Purchase Agreement: Used in situations where there are two or three owners, a cross purchase agreement is established between each of the owners. At the death of one of the owners, the surviving owners agree to buy a proportionate share of the deceased owner’s interest.

Buy-Sell arrangements are a simple, yet effective way for business owners of privately held companies to plan for the orderly transfer of business interests where two or more owners are actively involved in the business. In addition to securing the needs of the surviving family members and ensuring the continuation of the business, a buy-sell arrangement also ensures each owner that there is a buyer for their business interest at a fair price.

Business succession planning involves legal, tax and personal financial issues. Guidance from a qualified attorney or tax professional is strongly recommended.

For more information on business succession planning, contact us today.