Business succession planning ensures that your company will continue to operate in the event you are no longer able or willing to run it. This fundamental component of estate planning helps perpetuate your business so it can provide for you and your family. Having an experienced business succession attorney is an essential part of this process.
The estate planning attorneys of Loew Law Group work with individuals and businesses to help protect what they’ve built. If you own a company, we can help you prepare and implement a business succession plan that fits your and your organization’s needs.
What Is Business Succession Planning?
For years or maybe decades, you’ve invested serious time, money, and effort into your business. At some point, however, you will be unable or unwilling to run it. This may be because of an illness you currently have that gets worse, or because of an unexpected and catastrophic accident. In any event, someone will have to take the reins of your organization in your absence. Ensuring that the best people will be in charge is the objective of sound business succession planning.
But it’s not just a question of which individual, or individuals, will take over. Business succession requires consideration of the financial and legal interests of your successor. Making sure this person has the resources he or she needs to run the company is a vital part of the plan. Business succession is an important component of an individual’s larger estate plan. When it’s properly executed, it will address such matters as:
- Who will take over operations of the business, whether a family member or someone else
- How to maintain the direction of the business, especially as it expands
- How to minimize potential disputes between new management and others in the company
- How to protect the assets of the business
- What can be done to minimize risks and liabilities, such as taxes
Business succession is especially important for closely-hold or family-run operations. But it’s not as simple as designating a sibling or child to take over. You want to ensure that your successor is competent, or that measures can be taken if he or she proves to be incapable of running the company. There’s also a chance that rivalries could develop between your successor and others, so a plan can mitigate these difficulties. Finally, consider the goodwill you’ve cultivated with customers, employees, and other companies. You want to make sure this continues with whomever you select as your successor.
What’s Included In A Good Business Succession Plan?
There’s no single operating plan that works for every company, and the same is true when it comes to the business succession plan. The best plan is custom-tailored to the needs and interests of your specific organization. However, most plans have these features in common:
Continuity of your business. In the event of your sudden death or incapacity, someone needs to be able to step in quickly to take over. This is certainly true if there are major new projects or expansions taking place at the time. But you may also wish, at some point, to simply have a reduced role while still maintaining control of the direction of the business. A plan can provide for this.
Conflict avoidance. It’s not good planning to assume that the relative harmony of your company will continue after you are no longer in charge. New management or ownership can mean personality clashes, especially in a family-run business. There are ways to avoid these issues, including, for example, the formation of a limited partnership.
Asset protection. Whoever takes over your business will be in charge of its assets. Even though you assume this individual will be trustworthy – or else you would not have chosen him or her as a successor – you want to ensure these resources won’t be squandered. Measures can be put in place, for example, to limit who has the legal authority to access or use certain assets.
Policy implementation. If your company has never had formal policies governing management or employees, it’s time to consider one. Many businesses can get by with the founder in charge, operating with no or few written policies. However, in your absence, policies become increasingly important to ensure decisions are made with your business’s best interests in mind.
Training. Once someone takes over your business, will that individual be ready to hit the ground running? Or will they need the training to ensure they’re up to speed? What about the employees who then move up in the company to take over the role previously occupied by your successor? Business succession means employees change roles in the company, and proper training is necessary to ensure they do a good job.
Reduction of state and federal taxes. There are several federal and state taxes that could come into play during a business succession. Property, estate, income, and other taxes could be on the table, but a business succession plan can avoid or minimize these liabilities.
Considering the above goals, your business succession attorney may utilize several tools to help ensure a successful plan is put in place:
- Written policies
- Real estate transfers
- Buy/sell agreements
- Creation of LLCs or other business legal entities
- Insurance policies
Loew Law Group Is Ready To Help
Your goal is to ensure a smooth transition of business leadership in the event you are no longer at the helm of your company. Our attorneys are ready to advise you on how best to do this. At Loew Law Group, we understand that a sound business succession plan is just one part of comprehensive estate planning. If you’re ready to prepare for the future of your company, give us a call today to schedule your consultation.