It's been a busy few weeks with lots of new clients coming in to get their new businesses started. We've had some really interesting discussions and I am looking forward to working with these business owners to get their dreams on course and their businesses growing. One of the issues that is not often on their minds, but is always in the back of my mind when we get started, is what is the end goal. As Stephen Covey says, you need to begin with the end in mind. When it comes to businesses, that "end" to keep in mind is a plan for when you're no longer in the business. In the legal world, we call it Business Succession Planning and it's like an estate plan for your business.
When we discuss it, many clients wonder why they need to have a plan at the beginning. Not having a business succession plan is one of the main reasons why businesses don't make it long when a founder leaves a company. Whether it's leaving the company to your family members or having a trusted lieutenant to take over when you're gone, a plan ensures that your business has a path forward for a future without you.
What Does A Business Succession Plan Do?
Often, your business is your primary asset. Just like having an estate plan for your personal assets, a business succession plan helps to make sure that your business can continue if you die, become disabled, or retire. While you may be in your early 20's and healthy now, you never know what's around the corner. If you've got family, you'll want to decide what role they would have in the business after you are gone. Are they even able to operate the business? Or will you need to find someone outside of the family to be able to preserve the business?
If you aren't planning to keep the business in the family and are looking to just sell off the business, you'll need to consider,
- Who will buy the business?
- How would that sale be structured?
Issues to Consider
Each business is like a person, they are individual and have their own particular needs. There are some issues that are common to most businesses when designing a business succession plan,
- How will your ownership interest be divided?
- Will the ownership stay in your family or be sold to non-family members?
- What will happen to the income you were receiving from the business?
- What happens if the owner dies? (in this case, your plan should be created to avoid probate so that a court is not required to manage and oversee the business after you're gone).
- Have you spoken to your professional advisors (your attorney, CPA, insurance advisor, etc.)?
The ultimate goal of your plan is for you and your family to keep the value of the business, but it should also provide for the business to continue and grow without you as well.
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If it's time to create a succession plan for your business, let's set up a Legal Strategy Session to discuss the next steps for you and your business.