Succession Planning: What Happens To Your Business When You’re Gone?
We often ask ourselves a lot of questions about our business. We ask what the best way to run the business is, what decisions should we make, or what products or services should the business offer. But there’s one question that a lot of people don’t ask: What will happen to my business when I’m gone?
It’s not pleasant to think or talk about, but if you want your business to survive long after you are around, it’s something you should think about sooner rather than later. This is especially true with smaller businesses that may have only one real owner or operator.
You Have Someone
You may think that you are OK, because you have a friend, family member or business partner that is ready, willing and able to pick up the reins and run the business when you are gone.
That’s great-knowing who will take over, and having someone who can do that, is a large part of succession planning for your business. But it’s more complex than that, and there are a lot of issues you may not have thought of.
And by the way-even if you have someone who will take over-are they purchasing or inheriting the business after you pass? Do they have financing? Have they or your estate (if it’s a relative who is inheriting the business) given thought to estate tax issues?
Have you thought about your shareholders? They may have contracts, or agreements, that don’t allow for the person you think will be taking over, to just take over. Those agreements may require a vote, or they may even require the company to buy back stocks and shares. They may even allow shareholders to vote to “buy out” your designated successor, or worse, they may even provide your shareholders the rights to dissolve the company, and cash out the value of their shares.
You may have signed many contracts for your business that require that you be around. Your passing may even be considered a default in those agreements, leaving your company in serious debt, even though it did nothing wrong. This is often the case with personal guarantees, which require you (as the guarantor) actually be alive.
Has your business been valued? You may not think it’s that important. But what if your company needs a loan when you pass? What if there’s an estate dispute, or a creditor comes to collect assets? The value of your business becomes very important. You’re the one right now with the best ability to help a business valuation expert, provide needed documents, and answer vital questions. You also know best what the best strategy may be-a higher or lower valuation.
Does your business have written policies and procedures? No matter how qualified the person may be who you are leaving the business to, it’s still best for the rules and policies to be written down somewhere. This is especially true if there will be a period without true leadership, as power transfers from you to someone else.
Call the West Palm Beach business litigation lawyers at Pike & Lustig for help in making sure your business is safe in the long term.