Business Succession

Why Business Owners Need a Buy-Sell Agreement in Their Estate Plan

Published on: February 14, 2025 | By David W. Miller

A buy-sell agreement is a legal provision of an estate plan that details how the estate owner’s business will transition to different ownership when he or she dies. Buy-sell agreements are critical for business owners’ estate plans, as they help ensure that a business can continue to thrive even if the unexpected occurs. On today’s blog, we review some of the basics of the buy-sell agreement, as well as why they are so important for estate planners to consider.

What are the Elements of a Buy-Sell Agreement?

Each buy-sell agreement can look different, and the particular elements will depend in large part on the business owner’s goals. It is common, however, for a buy-sell agreement to include a list of triggering events that put the buy-sell agreement into effect. While the owner’s death will certainly qualify as a triggering event, it’s likely that the owner’s incapacitation and/or voluntary departure will also be triggering events.

The agreement will also include information about how to value the business, the specific buy-out procedures, and restrictions on who is legally able to purchase the owner’s shares of the company. These provisions should be as thorough and detailed as possible.

Probate for Small Business Owners: What You Need to Know

Published on: January 21, 2025 | By David W. Miller

Do you own a small business? Have you accounted for that business in your estate plan? If you have, this is a good first step in protecting your business in the long-term future. After you die, your small business might be subject to the probate process. As part of the estate planning process, it is important to understand what probate entails so that you can adequately protect the business that you have worked so hard to build.

What are the Pitfalls of Probate?

Importantly, probate can take several months from start to end. Therefore, if you leave your small business to go through probate, the business will likely suffer. While the probate process is pending, the business’s assets will likely freeze. In addition, it can be unclear who is supposed to take the reins of the business during this transitional time, and this can in turn cause irreparable harm to the business itself.

How Does a Small Business Owner Avoid Probate Altogether?

It is best, then, to try and avoid probate altogether with your small business. There are several key strategies that can help you achieve this goal:

Write a business succession plan: by taking the time to lay out a plan for your business in the event of your death, you can ensure a smooth transition after you are gone. A successful business succession plan requires buy-in from the person taking over your business, and it requires details about what that persons’ responsibilities will be.
Create a living trust: you can use a living trust to ensure continuity after you are gone. The trust helps your business avoid probate altogether, while simultaneously protecting the business’s assets from outside creditors.
Enter into a buy-sell agreement: you can also draft an agreement that, once properly executed, becomes legally binding and ensures the transfer of the owner’s business interest in the case of the owner’s death.

These are just a few ways that you can make sure your small business avoids probate when you are gone. Because life is full of the unexpected, we cannot emphasize enough how important it is to develop a thorough plan for your small business in case something unanticipated were to happen. By taking these important steps now, you can make sure your business succeeds in the long run.

Efficiently Transferring Ownership of a Family Business in Texas

Published on: August 15, 2024 | By Thomas W. McCulloch

If you are a business owner and want to transfer your ownership to a family member or external party, there are several options available to you. The best option, as always, will depend on your own circumstances and goals. On today’s blog, however, we review the basics of the most common options that business owners use when transferring ownership of their business. The most fundamental tip we offer to those considering transferring ownership of a business is to start looking into options early. Because the process requires so much care and attention, it’s never too soon to start thinking through the various possibilities.

Option 1: Gift the Business to a Family Member

If you have a daughter, son, or grandchild that you want to take over your family business, the first option is to transfer the business as a gift. In the United States, the gift tax exemption gives business owners the opportunity to transfer their company, in part or in whole, without charging any money. This federal exemption changes every year, so be sure to ask a wealth planning professional or estate planning attorney about this year’s annual limit.

Option 2: Sell the Business

You can, of course, sell your business in part or in full. By selling only part of the business, you can retain some ownership (and therefore some control) over the business while you take the time to pass down your institutional knowledge to the next generation. You could choose to do an internal sale, selling to a family member, or an external sale. Either way, it is important to think through your options early and do your due diligence so your business can carry on successfully.

Business Owner Estate Planning Strategies in Texas

Published on: July 13, 2024 | By David W. Miller

woman retirement risks and estate planning

When it comes to estate planning, business owners have a special set of needs to consider. Today, we cover some factors you might need to think through if you are a business owner drafting your estate plan. Of course, the specifics depend on the kind, size, and nature of your business, and if you have questions about how these factors apply to you, contact a Houston estate planning attorney you can trust.

What happens without an estate plan?

Unfortunately, without an estate plan in place, business owners can leave things in shambles when they pass. In some cases, the probate court can could freeze a decedent’s business account if there is no valid estate plan. An attorney will then have to petition the court for an emergency order to get permission to both handle the business’s affairs and decide how to deal with the business’s assets. The attorney, along with the decedent’s heirs, will be left to figure out how to figure everything out in a pinch. This can be stressful for beneficiaries and detrimental to the business at hand.

What factors should a business owner consider when drafting an estate plan?

Some questions related to your estate plan that you might want to consider if you are a business owner include:

What happens if you are sued?
How can you protect your business from liquidation or seizure?
What is your business worth now? What might it be worth in 10 years?
How will your heirs have liquidity to pay estate taxes on an estate if most of the value of the estate is tied up in a family business?
What should you do if you are selling the business and anticipating a large tax bill?

Who is Going to Take Over Your Business When You’re Gone?

Published on: June 20, 2024 | By Thomas W. McCulloch

If you are a business owner, there is no doubt you have thought about what might happen to your business once you are gone. At McCulloch & Miller, we specialize in planning for the future, and business succession is no different.

Today’s blog covers some basics that could help you think through your business’s long-term ownership, but at the end of the day, the most important takeaway is to plan early and plan often. By ensuring you have put your company’s plan in writing, you can take care of the business that you have worked so hard to build. As always, we recommend contacting a Houston estate planning attorney to talk through the specifics of your plan and make sure it covers all of the necessary and relevant details.

Option One: Internal Sale

One popular option among those who own family business or have children and grandchildren is to hand over the business to a relative. This hand off could be in the form of a sale or a gift. In this scenario, it’s important to talk to an expert about how to minimize the possible tax consequences that you and your loved one could suffer. It’s also important to have open and frequent conversations with the family member you plan on naming as the recipient of the business. If that family member is not open to the transfer, the long-term success of your business will be threatened.

The Importance of Having a Business Succession Plan

Published on: September 10, 2022 | By Thomas W. McCulloch

For many business owners, the future of your business and life’s work is at the forefront of your mind. Business succession planning should also be at the forefront of your estate planning. Beyond the complexities of regular estate planning, business succession planning must carefully consider unique tax implications and asset protection strategies. In addition, choosing the right person to control your business—or the right plan for sale or closure—is imperative in ensuring your preferences and wishes are carried out.

Who Will Control Your Business?

When it comes to who will control your business, any business owner knows the right leader is crucial to the success of the company. If you can no longer run your business, you have several options.

First, you could transfer ownership to someone you’ve selected yourself. While many owners believe this will ensure their life’s work is carried out with their preferences in mind, owners should carefully consider who they should pass the business to and what training will need to be done. In addition, there are tax liability issues at play in the transfer of a business.

McCulloch & Miller, PLLC Among Top B2B Service Providers on UpCity!

Published on: September 13, 2021 | By McCulloch & Miller, PLLC

McCulloch & Miller, PLLC is thrilled to officially announce that we are a part of the UpCity community of top B2B service providers!

At McCulloch & Miller, we help guide small business owners and investors through planning strategies such as asset protection, tax consequences, and viable retirement planning. Every investor is different, and no one plan is the same. That’s why we make sure to assist our clients in knowing all of their options to better protect their values, goals, and legacy, in the way that they feel is best.

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UpCity is a resource that helps connect businesses to service providers they can trust. With more than 70,000 listed providers—from marketing agencies to accounting firms to HR consultants to IT specialists, and many more—1.5 million businesses (and counting) have visited UpCity to research and identify the best partner for their needs.

How to Create a Succession Plan for Texas Small Business Owners

Published on: January 19, 2021 | By McCulloch & Miller, PLLC

For individuals who own a company, passing the business to another individual may not be at the forefront of their mind; but it should be. Succession planning involves creating a plan for another individual to either own or run the business after the person retires, becomes disabled, or dies. This process simply passes control of the business—or a share of the business—to another person through their estate plan. While passing a business to a loved one or employee may seem like an easy endeavor, it can often be more complicated than one would assume; for this reason, there are some detailed explanations to common Houston business succession questions below.

How Do I Pick a Successor for My Business?

Each business owner will look for different qualities when choosing a successor. For some, they know of a loved one that is excited to continue the success of the business. For others, individuals will select their successors from a pool of existing employees who have a hard work ethic and loyalty to lead the company. Business owners should carefully consult with potential successors to determine who they believe will manage the business best, once they have passed away. They should then name the successor in their estate plan as the new owner of the company.

For Houston Business Owners, Business Succession Planning is a Must

Published on: July 17, 2020 | By McCulloch & Miller, PLLC

There are few challenges as rewarding as running a successful business. Business owners pour years of hard work into pursuing passions that are about more than just making money. So it makes sense that many business owners prefer to have a say in what happens to their business after they leave it. That is why it is important for all Houston business owners to have a plan for succession in place in case something happens that prevents them from being able to run their business.

Like prudent estate planning, creating a business succession plan requires some thought. The options are numerous, and what is right for one person or business will not necessarily be right for another. Here are some things to consider when it comes to crafting a business succession plan:

Type of Business Entity

How Do I Incorporate My Business into My Estate Planning?

Published on: January 9, 2020 | By McCulloch & Miller, PLLC

“Running and owning a business is just like raising a child: Both are investments in the future, and both require a lot of time, resources and effort to raise successfully. One can argue that you would treat your business like you'd treat a child; you'd want it to succeed even after you've passed on or retired.”

When people think about estate planning, many just think about their personal property and their children’s future. If you have a successful business, you may want to think about having it continue after you retire or pass away.

Forbes’ recent article entitled “Why Business Owners Should Think About Estate Planning Sooner Than Later” says that many business owners believe that estate planning and getting their affairs in order happens when they’re older. While that’s true for the most part, it’s only because that’s the stage of life when many people begin pondering their mortality and worrying about what will happen next or what will happen when they're gone. The day-to-day concerns and running of a business is also more than enough to worry about, let alone adding one's mortality to the worry list at the earlier stages in your life.