Our well-written business succession plans make it clear who takes over the business and set the stage for a smooth transition.
Business succession planning is deciding who will take over your business. If you own a business, a comprehensive estate plan needs to include your business succession plan in the event of your death. The preservation of the wealth you have built depends on a clear and strategic succession plan.
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Many are predicting that the biggest wealth transfer in history is about to take place. As the owner of a private, owner-managed, or family-owned businesses, you are likely right in the mix of this wealth transfer.
What is your business succession priority?
As with any estate plan, you begin with your priorities. Is the long-term success of your business paramount? Or is your highest priority preserving family wealth? Sometimes your business’s and your family’s interests are aligned. Other times they are not. Even if your goal is simply to wrap up your business and give someone the authority to collect on accounts receivable, you want to put in place a business succession plan.
Your business organizational documents, such as your operating agreement, can set forth the seamless transition to transfer your business. Without a business succession plan, your interest in the company may be subject to probate.
If you have a spouse, child, or other family member who works for the business, you can pass your business on to them. If you co-own your business with other(s) or have a talented employee, you can include a buy-sell agreement that allows the remaining owner(s) (or employee) to have the right to purchase your interest in the business from your family. This ensures your family is fairly compensated and allows the business to continue. You can also transfer ownership for the sole purpose of wrapping up the business.
Your entity’s structure (Single member LLC? Partnership? S Corp? C Corp?) will impact how your business succession plan needs to be structured. The ability to obtain an accurate valuation of your company and financing options for potential successors also
Along with planning for the transition in the event of your death, business succession planning can also address who takes over your business upon your retirement, if you become disabled, and an exit strategy if a co-owner no longer wants to be part of the business. With the right business succession plan, you maintain control over the outcome and protect your legacy.