Your business is probably the most valuable asset you own — and in Metro Detroit, where family-owned companies anchor entire communities, it may also be your family’s primary source of income, identity, and financial security.

Here is the uncomfortable truth: without a succession plan, that business could collapse within months of your death or disability. Partners may fight for control. Heirs who never wanted to run a company get thrust into leadership. Key employees leave for competitors. Customers lose confidence. And a business you spent decades building ends up dissolved in probate court — sold at a fraction of its value to satisfy debts and resolve disputes nobody planned for.

Michigan law does not require business succession planning. But Michigan law will absolutely dictate what happens to your business interest if you die without one. Under MCL 700.2101, any asset not covered by a will, trust, or binding agreement passes through intestate succession — meaning the state decides who inherits your ownership stake, regardless of whether those heirs have any ability or desire to run the company. For business owners across Oakland County, Wayne County, and Southeast Michigan, that outcome can be devastating.

This guide explains the essential components of business succession planning in 2026 — including the significant federal tax changes under the One Big Beautiful Bill Act (OBBBA) that create new opportunities for Metro Detroit business owners to transfer wealth more efficiently than ever before.

Why Business Succession Planning Is a Legal Necessity — Not Just Good Practice

Many Michigan business owners assume their estate plan covers their business. It usually does not — at least not adequately.

A standard will or revocable living trust can name who inherits your business interest. But inheritance alone does not answer the questions that actually determine whether a company survives a transition: Who makes daily operational decisions the moment you are incapacitated? How is ownership valued and transferred without triggering a forced sale? What happens if one heir wants to run the business while another wants to cash out? How do you prevent a deceased partner’s spouse — who has no industry experience — from becoming your new 50% co-owner?

Without clear answers built into legally binding documents, these questions end up in front of a probate judge. Oakland County Probate Court handles these disputes regularly, and the outcomes rarely serve anyone’s interests as well as proactive planning would have.

“Many Metro Detroit business owners don’t realize that Michigan’s intestate succession statutes can split ownership of a closely held business among heirs who have no involvement in the company, no management experience, and conflicting financial interests. Under MCL 700.2102, a surviving spouse does not automatically inherit everything — particularly when there are children from other relationships or surviving parents. The result can be fractured ownership of a company that requires unified leadership to survive.”

Business succession planning integrates three disciplines that must work together:

• business law (operating agreements, buy-sell agreements, corporate governance),

• estate planning (trusts, wills, powers of attorney), and

• tax planning (gift and estate tax strategy, income tax optimization).

Approaching any one of these in isolation creates gaps that can prove fatal to the business.

Buy-Sell Agreements: The Foundation of Every Succession Plan

A buy-sell agreement is a legally binding contract that governs what happens to ownership interests when a triggering event occurs — typically death, disability, retirement, divorce, or voluntary departure. For any Metro Detroit business with more than one owner, this document is non-negotiable.

There are three primary structures.

• In a cross-purchase agreement, each owner agrees to buy the other owners’ interests when a triggering event occurs, usually funded by life insurance policies each owner holds on the others. This works well for businesses with two or three owners.

• In an entity-purchase (redemption) agreement, the business itself buys back the departing owner’s interest, which simplifies things for companies with multiple owners.

• A hybrid agreement combines both approaches — giving the company the first option to purchase, with remaining owners picking up whatever the company does not buy.

Every buy-sell agreement must address four critical elements:

• Triggering events must be specifically defined. Death and disability are obvious, but what about divorce? Bankruptcy? Criminal conviction? Voluntary retirement? Each scenario may require different terms.

• Valuation methodology determines the price at which interests change hands. Options include fixed-price agreements (updated periodically), formula-based approaches tied to revenue or earnings multiples, or independent appraisals at the time of the triggering event. The valuation method you choose has significant tax implications — the IRS scrutinizes buy-sell valuations that appear to understate fair market value.

• Funding mechanisms ensure the buying party can actually afford the purchase. Life insurance is the most common funding tool for death-triggered buyouts, but installment payments, company-funded sinking funds, or third-party financing may be necessary for other scenarios.

• Transfer restrictions prevent ownership from passing to unintended parties. Without these provisions, a deceased owner’s interest could end up with heirs who have no connection to the business — creating the exact conflict the agreement was designed to prevent.

Under the Michigan Limited Liability Company Act (MCL 450.4102 et seq.), LLC operating agreements can include succession provisions that override statutory defaults. This flexibility is critical — Michigan’s default rules for LLCs do not include buy-sell protections, and without an operating agreement addressing succession, an LLC member’s death can create legal uncertainty about the company’s continuation.

Trust-Based Succession Strategies for Michigan Business Owners

For sole owners or family businesses, trust-based strategies provide powerful succession planning tools that a buy-sell agreement alone cannot achieve.

A revocable living trust holding your business interest avoids probate entirely, ensures seamless management continuity during incapacity, and provides privacy that the public probate process does not. When your business interest is titled in the name of your trust, your successor trustee can step in immediately — without waiting for court appointment — to manage or transfer the business according to your instructions. For Oakland County business owners whose companies require daily operational decisions, this continuity can mean the difference between survival and collapse.

An irrevocable life insurance trust (ILIT) provides liquidity outside your taxable estate. When properly structured, the life insurance proceeds are not subject to federal estate tax, providing cash to fund buy-sell obligations, pay estate expenses, or equalize inheritances among heirs — some of whom may inherit the business while others receive cash.

For business owners with rapidly appreciating companies, a grantor retained annuity trust (GRAT) can transfer business interests to the next generation with minimal gift tax cost. Under IRC §2702, the grantor transfers business interests to the GRAT, retains an annuity payment for a fixed term of years, and any appreciation above the IRS-assumed rate of return (the Section 7520 rate) passes to beneficiaries tax-free. GRATs are particularly effective for businesses expected to increase substantially in value — the growth escapes both gift and estate taxation.

Family limited partnerships (FLPs) and family LLCs allow business owners to transfer ownership gradually while maintaining management control. The senior generation holds general partnership interests (or managing member interests) with full operational authority, while transferring limited partnership interests (or non-managing member interests) to the next generation — often at discounted values that reflect the recipients’ lack of control and limited marketability. These valuation discounts, when properly documented by a qualified appraiser, can significantly reduce the taxable value of the transferred interests.

The 2026 Tax Landscape: What the OBBBA Means for Business Succession

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently reshaped the federal tax environment for business succession planning – that is until it’s changed. Metro Detroit business owners should understand three key provisions:

The $15 million estate and gift tax exemption is now permanent (until it’s not).

Beginning January 1, 2026, each individual can transfer up to $15 million ($30 million for married couples) free of federal estate and gift tax. This exemption will be indexed for inflation beginning in 2027. Unlike the previous exemption under the Tax Cuts and Jobs Act, which was scheduled to be cut roughly in half at the end of 2025, the OBBBA exemption has no sunset provision. Michigan does not impose a state estate or inheritance tax, so Metro Detroit business owners face only the federal 40% rate — and only on amounts exceeding the $15 million threshold.

For a married couple owning a business valued at $20 million, this means their combined $30 million exemption eliminates any federal estate tax liability entirely. Even for wealthier families, the permanent exemption creates breathing room to plan thoughtfully rather than rushing transfers before a sunset deadline.

The qualified business income (QBI) deduction under IRC §199A is now permanent (until it’s not).

Pass-through business owners — including those operating as S corporations, partnerships, and LLCs — can continue deducting up to 20% of qualified business income. For 2026, the phaseout range for married filing jointly increases to $394,600–$544,600 (expanded from the previous $100,000 range to $150,000), and a new $400 minimum deduction applies for taxpayers with at least $1,000 of QBI from businesses in which they materially participate. This permanence allows business owners to make long-term entity structure and compensation decisions without worrying about the deduction disappearing.

Expanded qualified small business stock (QSBS) exclusion under IRC §1202.

For stock issued after July 4, 2025, the asset threshold for qualifying C corporations increases from $50 million to $75 million, the maximum excludable gain increases from $10 million to $15 million per investor per issuer, and a new graduated exclusion allows benefits beginning after just three years of holding (50% exclusion at three years, 75% at four years, 100% at five years). This change significantly benefits Metro Detroit entrepreneurs considering C corporation structures for eventual sale.

The annual gift tax exclusion for 2026 is $19,000 per recipient ($38,000 for married couples using gift splitting). This allows business owners to make annual transfers of business interests to family members without reducing their lifetime $15 million exemption — a powerful tool for gradual ownership transition.

Business Valuations: Getting the Numbers Right

No succession plan is complete without a defensible business valuation. Whether you are funding a buy-sell agreement, structuring a GRAT, gifting interests to family members, or planning for estate tax purposes, the IRS requires fair market value — and will challenge valuations that appear to understate the company’s worth.

Common valuation approaches include:

• the income approach (capitalizing earnings or discounting projected cash flows),

• the market approach (comparing to sales of similar businesses), and

• the asset-based approach (particularly relevant for asset-heavy businesses like manufacturing and real estate companies common throughout Oakland County and Wayne County).

For closely held businesses, valuation discounts for lack of marketability and lack of control can reduce the taxable value of transferred interests by 15–35%, depending on the specific facts and circumstances. These discounts must be supported by a qualified appraiser’s report — informal or outdated valuations invite IRS scrutiny.

“In our experience serving business owners throughout Metro Detroit, the most common succession planning mistake is relying on a valuation that hasn’t been updated in years. Businesses change. Markets change. A valuation performed three years ago may dramatically understate — or overstate — what the company is worth today, creating problems for buy-sell pricing, gift tax compliance, or estate tax filings.”

Business valuations for succession planning purposes typically cost $5,000 to $25,000 or more depending on the company’s complexity, but this investment protects against far more expensive disputes and tax controversies down the road.

Oakland County and Metro Detroit: Local Considerations for Business Owners

Metro Detroit’s business landscape creates succession planning challenges that differ from other parts of Michigan. Oakland County alone is home to thousands of closely held businesses — from manufacturing suppliers and professional practices to technology firms and commercial real estate operations — many of which were built by baby boomer founders now approaching retirement age.

Several local factors make succession planning particularly urgent for Metro Detroit business owners:

• Industry concentration matters. Manufacturing and automotive supply companies often carry significant hard assets (equipment, inventory, real property) that complicate valuations and create potential property tax consequences upon ownership transfer. Under MCL 211.27a, transfers of real property ownership can trigger property tax uncapping — though exemptions exist for certain family transfers of residential property.

• Multi-generational family businesses are common. When the founding generation built the business and the second generation grew it, the third generation’s succession plan must account for family members who are active in the business, family members who are passive owners, and family members who have no involvement at all. Equalizing treatment among these groups — while keeping the business operational — requires sophisticated planning that coordinates buy-sell agreements, trust structures, life insurance, and gift strategies.

• Professional practices require special attention. Medical groups, dental practices, law firms, accounting firms, and other professional service businesses face unique succession challenges because ownership is often restricted to licensed professionals. The buy-sell agreement must account for these licensing requirements, and the valuation must properly account for personal goodwill versus enterprise goodwill — a distinction that carries significant tax consequences.

• The permanent QBI deduction influences entity structure decisions. Assuming that §199A is now permanent, Metro Detroit business owners should evaluate whether their current entity structure (LLC, S corporation, C corporation, partnership) optimizes both operational flexibility and tax efficiency for the long term — particularly as ownership transitions between generations.

Frequently Asked Questions About Business Succession in Michigan

What happens to my business if I die without a succession plan in Michigan?

Without a succession plan, your business interest passes through your estate — either according to your will or, if you have no will, under Michigan’s intestate succession statutes (MCL 700.2101–2114). This typically means your interest goes through probate, which is public, time-consuming, and can take months or longer. During that period, there may be no one legally authorized to make business decisions, sign contracts, or manage employees — unless your estate planning documents specifically grant that authority.

Can I transfer my business to my children gradually without triggering gift taxes?

Yes. In 2026, you can transfer up to $19,000 per recipient ($38,000 if married and gift-splitting) annually without using any of your lifetime $15 million exemption. For a married couple with three children, that is $114,000 per year in business interests transferred completely tax-free. Combined with valuation discounts on minority interests, gradual gifting programs can transfer substantial business value over time with minimal tax consequences.

Do I need a buy-sell agreement if I am the sole owner of my business?

While buy-sell agreements are designed for multi-owner businesses, sole owners still need succession provisions in their estate plan. A revocable living trust with specific business succession instructions, a funded ILIT for liquidity, and a comprehensive durable power of attorney under Michigan’s Uniform Power of Attorney Act (MCL 556.201 et seq.) are essential. The power of attorney should explicitly authorize your agent to operate, manage, or sell the business during your incapacity.

How does Michigan’s lack of a state estate tax affect my succession plan?

Michigan does not impose a state estate or inheritance tax, which simplifies planning compared to states like New York, Illinois, or Washington that impose separate state-level taxes. Michigan business owners only need to plan around the federal estate tax — and with the $15 million per-person exemption ($30 million for married couples) now permanent under the OBBBA, many Metro Detroit business owners will face no federal estate tax liability at all. However, income tax planning (capital gains, QBI optimization, retirement account distributions) remains critical regardless of estate size.

What is the difference between a GRAT and an FLP for business succession?

A grantor retained annuity trust (GRAT) under IRC §2702 is an irrevocable trust designed to transfer appreciating assets with minimal gift tax — the grantor retains annuity payments for a fixed term, and any growth above the IRS-assumed rate passes to beneficiaries tax-free. A family limited partnership (FLP) is an entity structure that allows gradual transfer of limited partnership interests at discounted values while the senior generation retains management control. GRATs are better suited for transferring rapidly appreciating businesses over a defined period, while FLPs provide ongoing flexibility for gradual transfers with retained control. Many succession plans use both tools in combination.

How often should I update my business succession plan?

Review your succession plan every two to three years, or immediately after any significant change — including changes in business value, ownership structure, family circumstances, key employee departures, or tax law changes. The OBBBA’s permanent $15 million exemption and expanded QBI deduction may warrant updating plans that were structured to address the now-eliminated sunset provisions.

Should my buy-sell agreement use a fixed price or an appraisal-based valuation?

Fixed-price agreements are simpler but become dangerously outdated if not updated regularly. Appraisal-based agreements ensure fair market value at the time of a triggering event but introduce cost and potential delays. A common middle ground is a formula-based approach tied to objective financial metrics (such as a multiple of trailing twelve-month earnings), with a provision for independent appraisal if any party disputes the formula result. Whatever method you choose, the agreement should require periodic review — at minimum every three years.

Protect What You Built: Schedule Your Business Succession Consultation

Business succession planning is where business law, estate planning, and tax strategy converge — and getting it right requires attorneys who understand all three disciplines.

At Boroja, Bernier & Associates, we help Metro Detroit business owners create comprehensive succession plans that protect their companies, minimize tax exposure, and ensure smooth transitions to the next generation. Our estate planning attorneys serve business owners throughout Oakland County, Wayne County, Macomb County, and Southeast Michigan, with offices in Shelby Township, Troy, Ann Arbor, and Lansing.

Whether you need a buy-sell agreement drafted or reviewed, a trust-based succession strategy, or a comprehensive plan that coordinates with the 2026 federal tax changes, we build succession plans that actually work when they are needed most.

To schedule a consultation with the Michigan estate planning attorneys at Boroja, Bernier & Associates, call our law offices at (586) 991-7611 or contact us online. Your business deserves a plan as strong as the work you put into building it.