7 Things You Should Know About Business Succession Planning
While you're still alive and healthy, succession planning can help your firm grow. It will also most likely free up a significant amount of your time after it's completed, allowing you to enjoy more of life now!
You've most likely spent a lot of time working with your business plan as a small company owner. But have you considered what will happen to your business when you retire or pass away? Business succession planning is key to ensuring your company's survival after you're gone.
Here are seven things you should know about business succession planning:
1. Begin as soon as possible
Rather than putting it off until you're near retirement, succession planning should be an essential component of your company plan. A thorough succession plan shouldn't be thought of as an end in and of itself—it's simply the start of your company's next stage.
Not to mention that things don't always go as planned, and your untimely death, disability, or inclination to pursue another career might endanger the company's survival. Succession planning, like estate planning, provides stability and security for your company by ensuring that it will continue to flourish and serve even if something unexpected happens.
2. Put it in writing
A succession plan is not a legal document but should be created with the help of an attorney specializing in business law. This document should include your wishes for the future of your company. Businesses are often family affairs, which can further complicate matters—you'll want to avoid any hint of favoritism or unfairness in your plan.
When it comes to ownership transfers, thorough documentation is essential. You may ensure that everyone on your team is aware of the plan's scope, objectives, and mandate by carefully laying out the terms and conditions surrounding the transfer of ownership.
We can aid you in developing a comprehensive succession plan that will safeguard your firm from risks and conflict while also continuing your legacy as your Creative Business Attorney.
3. Get professional help
Succession planning is a complex process, and there's no shame in admitting that you need help to get it done right. In addition to hiring an attorney and financial advisor specializing in succession planning, you should also consult with your accountant and insurance agent. These professionals will be able to give you the best possible advice for your specific circumstances.
4. Decide who will take over
It is perhaps the most challenging part of succession planning, but it's also the most important. You'll need to decide which family member, employee, or outside party is best suited to take over the business when you're gone. The decision should be based on many factors, including ability, experience, commitment, and willingness to take on the responsibility.
Don't forget to consider the financial aspect—the person taking over should be able to afford to buy you out if that's what you decide.
5. Include essential stakeholders in the project
Your business succession plan will only be as strong as the team you put into carrying it out. In addition to the professional help mentioned above, you should also include essential stakeholders in the planning process, such as your spouse, children, shareholders, and key employees.
For obvious reasons, succession should be a joint decision if there are partners. But beyond that, you may wish to include your company's leadership team in the discussion. If your top-level staff isn't considered or given influence, the succession will likely be mired in conflict, with a slight possibility for success. If you're looking for a way to honor the contributions of your top team while also allowing them to move on, consider providing them with alternatives for leaving the firm that respects their years of experience.
Even if the buyout is not done through a retirement or severance package, it's essential to convey that you value their contribution to the company and want them to keep growing, even if they don't work for you.
6. Update your plan regularly
Your business will change over time, as will your circumstances. As such, it's essential to review and update your succession plan regularly—at least every five years, if not more often. Doing so will ensure that it remains relevant and responsive to the current environment.
7. Get advice from a professional
The process of succession planning can be daunting, so it's essential to get professional help. An experienced business attorney can guide you through the process and ensure that your succession plan is thorough and airtight.
It's critical to consult with a reputable advisor who can provide you with expert advice on how to proceed after succession impacts your business, whether it involves rearranging things, changing the legal entity, or even selling the firm.
Because nearly every succession plan will entail extensive legal and financial actions, you should choose an advisor with experience in those areas who can also bring in a complete succession team (when appropriate). It might be difficult for you to decide which of your children should take the wheel if it's a family business.
Make decisions objectively, not influenced by emotion. We can be that trusted advisor, walking you through the process of creating and implementing a comprehensive business succession plan as your Creative Business Lawyer®. We can also advise you on the legal, financial, tax, and insurance intricacies. Contact us immediately to ensure that your company's legacy will flourish even after you're no longer in charge.
We provide a comprehensive range of legal services for corporations. We can assist you in making the most extraordinary decisions concerning how to handle your business during your life and after your death. We also provide a LIFT Start-Up SessionTM or a LIFT Audit for an ongoing firm, which includes analyzing all of the legal, financial, and tax systems you'll need for your business.
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