Business Succession Planning
Most successful, small or family-owned businesses owe their success to the talents, focus, determination, and sheer hard work of their owners. Unfortunately, that same focus and determination often results in the owners not adequately or timely planning for the continuation of the business after they retire, or if they become incapacitated or die. In some cases, the value of the business has grown significantly over the years without the owners truly appreciating all that has been accomplished.
Like estate planning for individuals, business succession planning requires careful thought and an understanding of what is best for the business owners and their families. Unlike estate planning for individuals, in which an initial estate plan can often be completed in a couple of months, a sound and effective business succession plan can take several years to properly develop and fully implement.
A thoughtful business succession plan will identify the person or people to successfully lead the business when needed, and groom them to make sure they are prepared for their role. The successors may or may not be family members, and when some, but not all, family members are involved in the business, careful planning is required to ensure fairness in the owner’s overall estate plan. When non-family member business partners are the likely successors, detailed agreements should be prepared to ensure that a future transfer of ownership is smooth and meets everyone’s expectations.
Valuing the business is a crucial part of a sound business succession plan. Usually a formula, or basis, to value the business in the future must be considered and adopted. Life insurance or other sources of financing will often be needed to provide a ready source of funds for the successor to purchase the business upon the death of a key person. Therefore, business succession planning is usually a longer-term process than individual estate planning. Consulting and coordinating with experts in the fields of tax accounting, business valuation, and insurance is always advisable and necessary to complete a solid business succession plan.
I assist small and family-owned businesses to structure their businesses to operate efficiently, and to maximize the value that has been created over the years once owners or key persons resign, retire, become incapacitated, or die.
Some of the business succession planning documents that I prepare, and services I provide, include:
-Forming and Restructuring Business Entities -Articles of Incorporation
-Articles of Organization for LLCs -Partnership Agreements
-Bylaws -LLC Operating Agreements
-Shareholder / Buy-Sell Agreements
-Structuring Lifetime Gifts of Business Interests to Successor Family Members
-Revising the Business Owner’s Personal Estate Plan to Coordinate with Their Business Succession Plan
Completing a thoughtful business succession plan is essential to maximizing and preserving the value of a small or family owned business that was built over a lifetime.