Business succession records and questions checklist
Business succession records cover ownership documents, management plans, buy-sell terms, valuation data, and continuity measures. The groups below describe which records exist and what questions each one answers for owners of operating businesses, their spouses, and adult children. Estate planning practitioners describe ownership as handled through a will or trust and management as handled through a business succession plan.
Ownership and management documents
Ownership and management of a business are addressed in different documents. Practitioners note that ownership passes through a will or trust, while a business succession plan addresses who will manage the business, who may differ from its owners.
Buy-sell agreement terms
Buy-sell agreements commonly name the events that trigger a transfer, and their valuation terms drive the result. Practitioners regard vague or outdated methods as something that can make outcomes unpredictable and unfair.
Valuation records
The federal estate tax return instructions describe financial data to attach when reporting the value of inactive or close corporation stock. The data covers a balance sheet and multi-year statements.
Continuity and timing questions
Succession work is described as a long process. Practitioners say family business succession planning can begin well before retirement, which leaves time to talk about goals with advisors and family.
Common questions
What events commonly trigger a buy-sell agreement?
Practitioners say buy-sell agreements commonly identify death, disability, retirement, bankruptcy, divorce, and attempted impermissible transfer as trigger events. They also describe fixed prices, formulas, and appraisals as common valuation methods, and note that vague or outdated methods can make results unpredictable and unfair.
What financial data goes with a valuation of close corporation stock?
Federal guidance says valuing inactive or close corporation stock requires attaching complete financial data. That includes the balance sheet nearest the valuation date and earnings and dividends statements for the 5 years before the valuation date.