Building a successful business can create income, independence, jobs, and opportunity. But for many Black business owners, success is about more than what the company earns today. It is also about what the business may provide for children, grandchildren, employees, and the wider community in the future.
That is where generational wealth planning comes in.
A profitable company can become one of a family’s most valuable assets, but wealth does not automatically transfer successfully from one generation to the next. The business must be structured, managed, protected, and eventually transferred with intention.
For Black-owned businesses in Maryland, that means looking beyond revenue and asking a bigger question:
How can the business continue creating value even after the founder is no longer running it?
The answer may involve business structure, tax planning, retirement strategy, succession planning, valuation, and estate planning working together.
Start With the Right Business Structure
One of the first building blocks of long-term business planning is choosing an appropriate legal structure.
The IRS recognizes common business forms including sole proprietorships, partnerships, corporations, S corporations, and limited liability companies. The structure of a business can affect which federal income tax return must be filed and how the owners are taxed.
Maryland also emphasizes that business structure affects ownership and management, filing requirements, tax forms, and the level of personal risk associated with the business.
A structure that made sense when an entrepreneur first launched may not necessarily remain the best fit after the company grows.
A sole proprietorship, for example, may be simple to operate, but the owner is personally responsible for the business’s debts and losses. Maryland describes an LLC as a structure that can protect its members from personal responsibility for business debts while offering operational flexibility.
However, limited liability protection is not absolute, and forming an LLC does not automatically determine how the business will be taxed.
For federal income tax purposes, a single-member LLC is generally treated as disregarded from its owner unless it elects corporate treatment. Other LLCs can be classified differently depending on ownership and elections made.
So the better question is not simply:
“Should I have an LLC?”
Instead, business owners should ask:
“Does my current structure support my ownership, tax, risk-management, and long-term succession goals?”
As a business grows, the answer may change.
Use Tax Planning as Part of the Growth Strategy
Building wealth is not only about increasing revenue. Business owners also need to understand the tax consequences of earning income, reinvesting profits, paying owners, hiring employees, purchasing assets, and eventually transferring the company.
That is why tax planning should not begin when the tax return is due.
It should be part of ongoing business planning.
Depending on the type of business, tax planning may include:
- Estimated tax payments
- Payroll and employment taxes
- Owner compensation
- Business deductions
- Retirement contributions
- Major equipment or property purchases
- Ownership changes
- Business sales or transfers
Compensation planning is particularly important for certain corporations.
The IRS states that corporate officers are generally employees and that wages paid to an officer should generally reflect the services they perform. The IRS may adjust returns when compensation is unreasonably low.
For S corporations specifically, paying an owner through distributions is not a substitute for reasonable compensation when the shareholder performs services for the corporation.
Tax planning should therefore focus on complying with applicable rules while understanding the consequences of decisions before they are made.
The goal is not to chase tax “shortcuts.” It is to make informed decisions that support the business’s broader financial strategy.
Keep Business and Personal Finances Organized
As a company grows, good financial records become increasingly important.
Business owners should maintain records that clearly document business income, expenses, transactions, assets, and liabilities.
Strong financial records help owners understand whether the company is truly building value.
They can also support:
- Accurate tax reporting
- Legitimate business deductions
- Cash-flow planning
- Loan applications
- Business valuation
- Investment decisions
- Ownership transitions
- Potential sales of the company
Clear records become particularly important when preparing a business for another owner.
A successor, buyer, lender, or professional valuator needs to understand what the business owns, what it owes, how much it earns, and how consistently it performs.
The easier it is to understand the company financially, the easier it may be to make informed decisions about its future.
Build Wealth Outside the Business Too
Entrepreneurs often reinvest heavily in their companies.
That may help a business grow, but it can also create a situation where a large portion of the owner’s wealth is concentrated in one asset: the company itself.
Retirement planning can help diversify the owner’s long-term financial resources.
The IRS recognizes several retirement-plan options that may be available to small businesses and self-employed individuals, including:
- SEP plans
- SIMPLE IRA plans
- 401(k) plans
- Profit-sharing plans
- Defined benefit plans
A SEP can be established by a business of any size, including a self-employed individual.
A 401(k) allows employee salary deferrals and may also allow employer contributions, while profit-sharing and defined benefit plans operate under different rules and funding structures.
The right option depends on factors such as the size of the business, number of employees, compensation, desired contribution levels, administrative responsibilities, and the owner’s retirement goals.
For 2026, for example, the maximum employer contribution to a SEP is generally limited to the lesser of 25% of eligible compensation or $72,000, subject to the plan rules and applicable compensation limits.
Business owners should evaluate retirement planning as part of an overall wealth strategy rather than assuming that selling the company one day will provide everything they need.
Create a Succession Plan Before It Becomes an Emergency
Many small and family-owned businesses depend heavily on the founder.
The founder may maintain the key client relationships, approve financial decisions, manage employees, negotiate contracts, and hold much of the institutional knowledge.
That creates a vulnerability.
- What happens if the founder unexpectedly becomes ill?
- Who can sign documents?
- Who manages the employees?
- Who owns the business after the founder dies?
- What if two family members believe they should be in charge?
Succession planning is designed to answer those questions before a crisis occurs.
A thoughtful business succession plan may address:
- Who will manage the company
- Who will eventually own it
- Whether ownership will remain in the family
- How ownership interests may be sold or transferred
- How departing owners will be compensated
- How the company will be valued
- What happens after death or disability
- Whether key employees have a role in the transition
- How disputes among owners or heirs may be handled
For Black-owned family businesses, succession planning can be particularly meaningful when the goal is to preserve a business that represents years or even generations of work.
However, transferring ownership is only one part of succession.
Future leaders also need preparation.
A child or relative who receives ownership without understanding the company’s finances, customers, obligations, and operations may not be positioned to protect what was built.
A sustainable succession plan transfers both ownership and knowledge.
Understand the Tax Consequences Before Transferring Ownership
A business can be transferred in several ways.
An owner might:
- Sell to an outside buyer
- Sell to another owner
- Transfer ownership to family members
- Gift business interests during life
- Transfer ownership through an estate
- Use a trust or other planning arrangement
These options can produce very different legal and tax consequences.
For example, when an entire business is sold, the IRS generally does not treat the transaction as the sale of one single asset. Instead, the individual business assets are generally treated separately for purposes of calculating gain or loss.
Inventory, depreciable property, real estate, goodwill, and other assets may receive different tax treatment.
The allocation of the purchase price can therefore matter significantly to both the seller and the buyer.
Business owners considering a sale should understand the potential tax consequences before agreeing to a transaction structure.
Be Careful When Gifting Business Interests
Some business owners want to transfer part of the company to children or other family members during their lifetime.
That can be part of a broader succession strategy, but the gift-tax rules should be considered first.
For calendar year 2026, the federal annual gift-tax exclusion is $19,000 per recipient for qualifying present-interest gifts.
The federal basic exclusion amount for estate and gift tax is $15 million for 2026.
A gift above the annual exclusion does not necessarily mean that gift tax must immediately be paid.
However, depending on the facts, it may require the donor to file Form 709 and may use part of the donor’s available lifetime basic exclusion after accounting for applicable exclusions and deductions.
This is particularly important when gifting ownership interests in a valuable closely held business.
The value assigned to those interests matters.
Significant transfers should therefore be carefully documented and, when appropriate, supported by a qualified valuation.
Maryland Estate Tax Can Matter Before Federal Estate Tax Does
Maryland business owners also need to consider state-level estate taxation.
For deaths occurring in 2019 and later, Maryland’s estate-tax filing threshold is $5 million.
By comparison, the federal basic exclusion amount for individuals dying in 2026 is $15 million.
That means Maryland estate-tax planning can become relevant at a significantly lower estate value than the federal estate-tax threshold.
For successful business owners, this matters because the value of a business interest can contribute substantially to the value of the owner’s estate.
A business that began modestly but became highly successful may eventually represent millions of dollars in value.
Owners should therefore avoid assuming that estate-tax planning is only relevant to extremely wealthy families.
For Maryland residents with valuable businesses, real estate, investments, retirement accounts, insurance, and other assets, reviewing the total estate can be important.
Maryland Also Has an Inheritance Tax
Maryland’s inheritance tax is separate from its estate tax.
For decedents dying on or after July 1, 2000, property passing to certain close relatives is generally exempt from Maryland inheritance tax.
Those exempt recipients include, among others:
- Spouses
- Children and other lineal descendants
- Spouses of children or other lineal descendants
- Parents
- Grandparents
- Stepchildren
- Stepparents
- Siblings
- Certain corporations owned by qualifying relatives
Property passing to other individuals may be subject to a 10% Maryland inheritance tax.
That distinction can become relevant when an owner intends to leave business interests to people outside the immediate family.
The appropriate strategy depends on the beneficiary, type of asset, ownership structure, and complete estate plan.
Coordinate the Succession Plan With the Estate Plan
A business succession plan should not operate separately from the owner’s estate plan.
Business governing documents, buy-sell agreements, trusts, wills, powers of attorney, and other estate-planning documents should be coordinated so they do not produce conflicting outcomes.
Consider a family business with three children. One child works in the business full time and has spent years learning how to operate it. The other two have completely different careers. Simply leaving one-third of the business to each child may produce shared ownership between people with very different interests, levels of involvement, and financial goals. That may be exactly what some families want. For others, it may create conflict. The important point is that the result should be intentional.
An integrated estate and succession plan may address:
- Who will own the business
- Who will control or manage it
- What happens to the ownership interest at death
- How nonparticipating heirs are treated
- How the business will be valued
- Whether ownership can be sold outside the family
- What happens if the intended successor does not want the business
The estate plan and business documents should support the same overall objective.
Know What the Business Is Worth
Business valuation is another important part of generational wealth planning.
Owners often know the company’s annual revenue or profit but may not know what the business itself is worth.
Those are different numbers.
Understanding business value can be useful when planning for:
- A sale
- Retirement
- Ownership transfers
- Gifts
- Estate planning
- Buy-sell agreements
- Insurance needs
- Family succession
Valuation becomes particularly important when the business represents a substantial percentage of the owner’s estate.
Imagine that an owner believes the company is worth $800,000, but a professional valuation shows that its fair market value is several million dollars.
That difference could materially change the owner’s succession and estate-planning strategy.
Valuation should therefore be addressed before a major transaction—not after one has already occurred.
Prepare the Next Generation to Manage Wealth
Generational wealth is not created simply because an asset passes from parent to child.
The next generation also needs the knowledge to manage what they receive.
For family businesses, that can mean gradually involving future leaders in:
- Financial reporting
- Operations
- Client relationships
- Strategic planning
- Legal responsibilities
- Tax planning
- Employment decisions
- Long-term investment decisions
Some family members may eventually become business operators.
Others may become owners without participating in daily management.
Those roles should be clearly understood.
The goal is not to force the next generation into the family company. It is to create a thoughtful plan for ownership, leadership, and wealth management based on the family’s actual circumstances.
Start Generational Wealth Planning Before the Transition
One of the most important principles of succession planning is simple:
Do not wait until the transition has already begun.
An owner preparing to retire next month has fewer planning opportunities than an owner who starts thinking about succession years in advance.
For Black-owned businesses in Maryland, useful questions may include:
- Is our business structure still appropriate for our current size and future goals?
- Are our financial records organized enough to demonstrate the company’s value?
- Are we planning for taxes before major transactions occur?
- Have we built retirement assets outside the business?
- Who could manage the company if the founder became unavailable tomorrow?
- Who should ultimately own the business?
- Have future owners or leaders been prepared for their roles?
- Do our estate-planning documents and business agreements support the same outcome?
- Could Maryland estate tax affect the family even if federal estate tax does not?
The answers to these questions can evolve as the company grows.
That is why business succession and estate planning should be reviewed periodically instead of treated as a one-time project.
Build the Business. Protect the Value. Prepare the Legacy.
A thriving Black-owned business can create far more than current income.
It can create employment, fund education, support families, invest in communities, build retirement security, and become an asset that continues creating opportunity long after its founder steps away.
But transforming business success into generational wealth requires deliberate planning.
For Maryland business owners, that may mean coordinating:
- Business structure
- Tax planning
- Financial recordkeeping
- Retirement planning
- Business valuation
- Ownership transfers
- Succession planning
- Estate planning
The earlier those pieces are considered together, the easier it may be to identify risks and make informed decisions about the future.
Building the business is the first step. Protecting its value and preparing the next generation is how that success can become a lasting legacy.
The Law Offices of Beverly Winstead assists Maryland business owners with business, tax, and estate matters that may intersect throughout the life of a company.
Contact the Law Offices of Beverly Winstead to discuss a strategy tailored to your business, family, and long-term goals.
This article is provided for general informational purposes only and does not constitute legal or tax advice. Federal and Maryland tax laws are subject to change, and the consequences of any business, tax, succession, or estate-planning strategy depend on the specific facts and circumstances.