Law Office of Rick Todd Blog

Wednesday, December 6, 2017

Common Questions about Business Succession

When you are planning the future of your small business, it's common to want it protected for future generations. Estate planning can help protect family-owned businesses, but there are some common questions about business succession.

What is business succession?

Essentially, business succession is the transfer of business ownership upon the death or incapacitation of the owner. Although some succession plans include retirement, for the general purposes of business succession, this as a logical progression of the transfer of control from the current owner to their designated successor, whether through retirement or incapacitation.

Why should I create a succession plan?

Nothing can throw a successful business into chaos faster that doubt about the leader. Ensuring that there is competent leadership is key to maintaining business continuity. In other circumstances creating a succession plan with a lawyer protects the financial interests of a business owner who may be considering selling the business to fund their retirement versus giving it to a family member. Without a contractual agreement for the dispensation of the business in place before there is a question of new ownership, relationships between family members can become strained.

Who should I leave my business to?

Some business owners worry that they must treat all family members equally when it comes to business succession, but this isn't always the case. If there are a couple of key family members who have been working in the business, they may have a vested interest in its success, as well as an expectation of ownership in the future. Or, perhaps none of the owner's family wishes to keep running the business. In that case, preparations to sell the business would be put in place and a legally drafted plan for the dispersal of the assets.

Planning for business succession isn't always cut and dried. A professional attorney who specializes in estate planning can help guide you through some of the unique questions you have with regard to your family company or small business. An important thing for any business owner to do is have a family meeting addressing any concerns about the future of the business, and who may be expected to take a role in ownership and management. This may make answering questions from your attorney easier. The best business succession involves communication.

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