Most business owners know they should have a succession plan. Far fewer have one. Without it, decisions about who runs the business, who owns it, and what it is worth often get made by default, through a probate court, a surviving co-owner, or a tax bill that arrives before anyone has agreed on a path forward. For New York owners, a few state-specific rules make planning even more important.
Start With the Goal
The right legal tools depend on where you want the business to end up: handed to family, sold to a partner or key employee, sold to an outside buyer, or wound down. Each path calls for different documents and different timing. Settling on a direction early, even if it changes later, keeps the rest of the planning from drifting.
Check Your Ownership Documents
Your operating agreement, shareholder agreement, or partnership agreement is the foundation. It should say what happens when an owner dies, becomes disabled, divorces, or simply wants out, and it should restrict transfers to people you have not approved. If your business is a licensed professional practice, ownership may be limited to licensed professionals, which narrows the list of who can take over (see our earlier article on business structures for licensed professionals).
Buy-Sell Agreements Need Maintenance
A buy-sell agreement sets the terms on which owners or the business can purchase an exiting owner’s interest. It is only as good as its current terms. Owners should confirm that the price reflects what the business is worth today, that the funding (often life insurance) is adequate, that the agreement lines up with their estate planning documents, and that a transfer will not trigger an unintended tax result. An outdated agreement can create liquidity problems or turn into the dispute it was meant to prevent.
Valuation Drives Everything
The value of the business affects the size of any gifts, the estate tax exposure, the price in a buy-sell, and the odds of a dispute. A valuation done years ago may no longer hold up. Refreshing it periodically, especially after a period of growth, keeps the rest of the plan grounded in reality.
New York’s Estate Tax Is the Surprise
The federal estate tax exemption for 2026 is $15 million per person, so many owners assume estate tax is not a concern. New York is different. Its exclusion for 2026 is $7.35 million, far lower. If an estate exceeds that amount by more than about five percent, the exclusion disappears and the entire estate can be taxed, not just the portion above the line. New York also does not let a surviving spouse use the deceased spouse’s unused exclusion, and taxable gifts made within three years of death are added back to the estate. A business can easily push an owner over New York’s line even when no federal tax is owed.
Structure and Liquidity
For owners who want to pass along value while keeping control, entity structure can help, such as separating voting and nonvoting interests. Transfer restrictions, if properly structured and documented, may also support valuation discounts. Just as important is liquidity. Taxes, administration costs, and ongoing operating expenses can come due before ownership questions are resolved, so many plans include life insurance, reserve funds, or a structured buyout to bridge the gap.
Plan for Disability, Not Just Death
Succession is not only about what happens when an owner dies. If an owner is suddenly unable to work or make decisions, someone needs the authority to keep the business running. Make sure your documents name who steps in and what they are allowed to do.
Takeaway
Good succession planning pulls together your ownership agreements, your tax planning, and your personal estate plan, and the pieces need to match each other. The earlier you start, the more options you have, including options that may disappear after a triggering event such as a death or disability. Review the plan whenever the business, the family, or the law changes. If your plan has not been looked at in years, we would be glad to help you take a fresh look.