The Legal Future of Your Business: Transition vs. Transfer

By | April 12, 2016

You’ve worked hard building your business and you want to ensure that tradition of success extends beyond your tenure. The realities of the situation dictate that even though it might be unpleasant to think about, it is extremely important for all business owners to have a succession arrangement. The health and longevity of a business depend on careful planning – both estate planning and business transition. While these two processes are often mentioned interchangeably, they are actually different processes; one is not intended to replace the other.


Also known as “transfer,” estate planning involves the conveyance of an individual’s assets to another person or entity. Making a succession plan for a business protects it against the financial risk of what would happen in the event of the owner’s disability or premature death. Without an exit strategy, the business would be subject to liquidation at rock-bottom prices or could possibly be dissolved, thereby leaving the owner’s family with little or nothing. There are many scenarios that a transfer plan can address, such as multiple successors, trusts, sales and tax issues.


Business transition involves the transfer of a business asset or entity from an existing owner seeking to exit, to new ownership. The process can be very simple or very complex, depending on valuation of the business and the resources, the transfer of the tangible and intangible assets, and how the sale will be financed. A cash sale is the quickest and easiest, while the process for a larger company with stockholders can be quite time-consuming and complicated. The transition can occur through the cash purchase of individual items, a purchase of share interest, or a purchase of stock or certificates (or a mix of these options).


Ideally, these two processes are supposed to work together to protect the business owner and his or her corporate vision. The biggest difference is timing – estate plans consider transfers beyond the life of the owner while business transfer plans consider transfers during the life of the owner.

An experienced estate planning attorney can help a business owner sort through this maze of issues to create the best transition and transfer plans given the owner’s unique set of circumstances. Legal advice is invaluable for navigating the process efficiently and effectively.

About the Author:

Thomas Bunch II is a bankruptcy lawyer in Lexington, KY. Mr. Bunch, active in both personal and corporative bankruptcy areas. However, Mr. Bunch enjoys consulting for small and new businesses as well as incorporations. He is the co-author of “Using Social Science Methods to Improve Voir Dire and Jury Selection”, published by the American Law Institute and the American Bar Association.

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