Without a succession plan, under common law, your restaurant or bar would go to your wife and, if no wife, then your children.

Many times, a restaurant or bar dropped in the lap of your wife or children is an unfair burden to them especially if they are ill-equipped to handle the responsibility.

That is why a plan for succession is a good idea. 

Succession planning for restaurant owners is merely a plan rendered to legal documents, indicating what happens to the restaurant upon your retirement or death.

Succession planning for closely held restaurants can be as simple as a family gift or as complicated as multiple buy-sell agreements backed by life insurance.

Setting up a Trust and a Will gives legal guidance as to what you want to happen to your assets including your business at time of death.

For a sole-owner restaurateur who wants to retire, there are usually only two choices.  Sell to a non-relative or gift or sell the business to a close relative usually a child.  Both a sale and a gift have tax consequences so you should consult with your tax accountant before you finalize any plans.

For partnerships of two to four persons with partners who want to stay in the business, a value must be placed on the retiring person’s interest and the continuing partners purchase the retiring persons interest usually but not always at pre-negotiated terms.

For partners who want to continue after the death of a partner, it is advisable to have a buy-sell life insurance policy paid for by the business so that the remaining partners can use the proceeds to buy out the interest of the deceased partners estate.

For larger restaurant enterprises with multiple owners or locations, a succession plan should be charted out by a tax attorney or a combination of an attorney and CPA. 

Any pre-planned exit strategy also known as a succession plan should be designed or at least reviewed by your CPA and/or tax attorney because of the legal considerations as well as the estate, and income tax consequences.