What To Consider During Business Succession Planning

During succession planning, business owners should consider worst-case scenarios, timing issues, finances, legal advice and different succession options.

These components are crucial in making sure your wishes are carried out and your assets are protected.

First, owners should consider which form of succession best suits their financial and personal goals. Three options that allow a business to continue operating in case of a triggering event are:

• Passing on ownership to one or more relatives

• Allowing one or more partners, employees or other invested parties to buy the business

• Selling the business to a third party

Owners also have the option of closing and liquidating the business. This may be fitting if buyers are not available or if the business possesses substantial inventory.

Although many business owners plan to closely oversee the succession process, it is critical to make a plan that addresses the possibility of the owner’s disablement or unexpected death.

A clear plan can keep a business operating smoothly and head off disputes between heirs or potential successors. This can help protect the worth of the business and unwanted outcomes, such as liquidation.

Finances & Income

Business owners should also take stock of their insurance policies and retirement savings during business succession planning.

For example, owners should assess whether their disability and life insurance policies can provide for their families and address any succession-related issues. Owners should also determine whether they need a certain amount of income from a buyout to help finance retirement.

When To Start Planning For Succession

Business owners should begin succession planning early because the process may require significant amounts of time, especially if it involves finding an appropriate buyer or training a successor.

However, even if succession planning has been on the back burner, it is probably not too late to put together a comprehensive plan going forward.

Finally, business owners should consult with qualified professionals before finalizing succession plans. Especially if a plan involves a buyout, it is imperative for owners to seek the opinions of accountants and appraisers trained to place proper value on the particular type of business.

 Regardless of the nature of the plan, owners also should confirm that it addresses most contingencies and that it will hold up legally.

Interested in Working With Us?

If you need any help regarding your business or other legal matters please reach out to us directly here and schedule a call with one of our paralegals on our scheduling page here.