Running a successful business for most of your life has likely been a great feeling of accomplishment, but have you thought about the future lately? What would happen if you suddenly passed away? Would your business be able to carry on without you, or would it just fold without anyone in your family being able to maintain the business?
Succession Planning is Essential
This often happens to those who don’t create a succession plan. Far too many business owners don’t think about the realities that occur if they die unexpectedly. You might think your staff can keep things going, even if you have no family willing to.
If you have one or more partners, the issues become much more complicated.
Most business partners would not choose to have the deceased’s partner’s surviving spouse as their new partner, but that is exactly what will happen unless proper planning is done. If the surviving spouse wishes to be bought out, your company may not be able to handle that financial commitment.
It’s time to take this seriously, including getting family involved if you know they’re interested. You can do smart succession planning in three specialized steps to bring peace of mind.
Trying to Predict the Unpredictable
As Forbes notes, how can you make sure what you want to happen to your business actually does if you suddenly die? It’s worth noting things can occur beyond just death.
You might become incapacitated due to illness or injury, leaving your entire staff scrambling on how to take care of things.
In these scenarios, things can potentially become worse because your family would have to provide medical care for you while simultaneously trying to keep your business operating.
What’s important first is to look at creating short-term and long-term succession plans. You can do this using a three-step approach.
1. Working With an Attorney to Create a Plan
Planning for your business’ long-term prosperity is a serious endeavor. Never attempt to create a succession plan on your own without legal advice.
Start working with an attorney dealing in estate and business succession planning if you don’t already have one. They’ll work closely with you to create a succession result you intend so you don’t leave your family and partners in a major legal mess.
What they’ll do is create multiple scenario plans since successions can occur through retirement as well as death. In other words, they’ll also work with you on an exit strategy so you can hand over your business to a family member or associate without causing disruptions.
Exit strategies are typically easier because at least you’re around to provide guidance during transitions. You might even have to deal with an acquisition during this period if another business buys you out as you retire.
Preparing for death, though, usually involves looking at a particular business structure in advance to provide the best tax and liability aspects for your family.
These considerations are essential in ensuring the wellbeing of your family, partners, business, and assets.
2. What Business Structure Should You Use?
Perhaps you’ve listed your business as a sole proprietorship, meaning that if you die, your business is likely to go with you. This isn’t always a good option, unless you have a will in place indicating your next-of-kin receives money from your business.
Without a proper will in place, your sole proprietorship would likely shut down, meaning your family gets nothing.
Your attorney can help you look into better options like registering as a limited liability company. The latter provides a pathway for succession to another person.
Partnership agreements work similarly so there’s a smooth transfer of power if you’ve worked with a partner for years.
3. Craft the Details of Your Succession Plan Within Your Business Structure
Succession plans should work on more than just the financials. You’ll want a plan that helps your family emotionally as well as financially.
Think about what it means to your family to leave them more financially sound and without massive tax burdens or other liabilities. Plus, it’s time to take more seriously all the years of hard work you’ve put into your business.
No doubt you want that hard work to pay off after you die, either in keeping things operating or through financial reward to deserving people who helped you build up.
Get Started on Your Succession Plan with a Free Consultation
Contact us at Port Legal, where we do trust and probate work to compassionately help those grieving with the loss of a loved one deal with legal issues.
If you’re interested in starting to lay out your succession plan or exit strategy, we offer free, no-obligation consultations to answer your questions and help you explore your options.