Considerations for a Business Succession Plan
No matter how good of a business person you are, one thing is for certain: Time will catch up to everyone. But the good news is that your business can outlast all of us—that is, assuming you have a good business succession plan.
How Businesses are Lost
Certainly, businesses can be lost in any number of ways.
A partner, owner or shareholder can die or be incapacitated. There can be a bankruptcy. Shareholders can sue to have companies dissolved or broken up. But what about simply the natural course of time? Do you have a plan that will ensure that your business is properly left to your relatives (or to whoever it is that you want to own and run your business after you’re gone, whether by retirement, disability or death)?
Parts of a Succession Plan
A good succession plan includes some or all of the following items:
- Business valuation – a valuation can assist when dealing with tax issues. Whether the valuation is better with a higher or lower valuation is an individual question that requires an analysis of tax and estate issues. But a good succession plan should always have some kind of valuation attached to it.
- Is there a list of insurances that need to be obtained or continued? Are there claims that can be made on any existing insurance that could be payable upon your death or incapacity or retirement?
- What are your operating procedures? Too often, businesses, run by the same person or people over time, know their own policies but never reduce them to writing. If you disappeared tomorrow, would there be some handbook, manuals or policies and procedures, to guide your successors and ensure that the company is running the way it’s supposed to?
- If your company is big enough, who will communicate with the public about your business’ transition or about the succession of management?
- If your business is involved in any litigation, who will guide the litigation? In other words, who will make the decisions, and talk with the lawyers about the direction of the lawsuits?
Estate Matters and Family
Of course, inherent in any business plan that addresses succession, are estate matters. If your family could fight over control, ownership or power in the business, these can be addressed in estate documents-but they can also be addressed in your business’ succession plan.
Your succession plan should deal not just with kids, but with step kids. Are you legally still married to an ex you were never divorced from? If you don’t deal with that from an estate or family law standpoint, at least a business plan can ensure that your wishes as to where the business goes, will be carried out.
You should be especially mindful of family members and succession if for some reason your intent is to leave the business to someone other than family.
Call the West Palm Beach business litigation lawyers at Pike & Lustig to help you make sure your business carries on and is safe, no matter what happens.