In Florida and even in other parts of the United States, it is not easy for a business owner to engage in business succession planning. The reason is that no one wants to talk about their death. This planning gets into the picture when a person asks himself what will happen to my business after I pass away. Of course, it is a tough thing to think about. But a responsible business owner with the intention that his business should stay even after him should think about this planning.
What is Business Succession Planning?
Business Succession Planning will help you to know in advance what will happen to your business if you are no longer around. What is this planning all about? It is a set of financial and strategic decisions to control the transition of your business smoothly. Typically it is a set of documents that will dictate the movement of ownership after your retirement, disability, or death. This document will give a step-by-step guide to the readers on the transmission of your business ownership from your name to the name of another person.
This document will also dictate the purchase terms and sale price. In turn, you can stay with complete peace of mind that your family has a clear instruction to follow to pass on your business after you.
What Should Be The Goal Of Business Succession Planning?
A well-framed business succession planning aims at benefiting all parties involved. Yes, it should benefit the relieving business owner, the successor, the employees and the business as well. The purpose of this plan is to make sure that the business still has the right leaders in place if a transition happens soon. Your business should not function without an appropriate leader after the key player passes away.
Business succession planning is a dynamic process. It draws many different business disciplines. In their day-to-day operations, many private businesses showcase enviable profits and professionalism. However, they fail to frame and complete the transition to the next generation leaders rightly. Even the most competent and advanced business experts can get carried away in the complexities associated with framing a business succession plan.
How Does Business Succession Planning Work?
To frame the right Business succession planning, you should have an attorney by your side. Also, it is better to ensure that the attorney knows everything about your business. As mentioned earlier, this planning involves a collection of different documents and plans. So, it is better to make sure that before you engage in this planning, you have the following things ready with you:
- Documents related to your estate planning
- The right plan for how to train and prepare the successor for your business
- A framework on how to transfer legal ownership of your business.
- Thinking about the funding required for ownership transfer
- Information about any securities issued
- Documents related to changes in the corporate structure required on the transfer of ownership
When discussing with your attorney, you will discuss what will happen to your business in the case of your non-availability. Also, you should discuss the exit strategy that you plan to leave your business. Once you have the goals set clearly, you and your lawyer will work to make any modifications to the business organization that is required to make sure that your plan can be properly executed. To facilitate these changes, your business succession planning attorney will prepare the legal documents required. Also, to make sure that you keep the succession plan ready to be implemented, you should talk to your accounts department and insurance agents.
What Will Happen If You Do Not Have A Succession Plan in Place?
When you do not have a proper business succession plan in place, the entire shares of your business or your solo practice will pass on automatically to your family members. You might feel it to be good. But, most family members are not ready to manage the shares of their deceased family members. Even most of them are not ready to take the responsibility of running the business. Further, when your grieving family members are not left with any directions, there are chances of conflicts. For instance, if you have two children, they might get into trouble deciding who should take which responsibility of the business.
Of course, you might think that who cares when something happens to my business after I pass away. But, the thing to remember here is that you have put all your hard work into developing such a loyal client base. So, you should make sure that the legacy of your business continues even after you. So, remember that the sale of your business to an unknown buyer or the mismanagement of your shares may result in damages to your shareholders, customers, and clients. In turn, there are chances of lawsuits to be raised, which will again add a burden to your grieving family members or successors. So, it would be better to ensure that you have a well-derived business succession plan well in advance of your retirement.
Understand The Types Of Business Succession Planning:
When you engage in business succession planning, you should give the utmost attention to financial and taxation considerations. Also, you should consider the interest of your creditors, employees, and clients. Of course, this planning can be tailored to the needs of your business. But, it is better to keep yourself aware of the types of this planning so that you can choose a suitable type:
- Retention planning is something that involves keeping the business with your family members after you pass away. This type of planning is generally done with your estate plan.
- Buy-Sell Planning is a type that involves the transfer of your business to another entity or corporation. When planning, you should decide how to decide the value when the assets of your business are transferred.
As your Estate Planning & Probate Attorney, we will help with framing your business succession plan.