Business Succession Planning

What is a Business Succession Plan? 

A Business Succession Plan is a multidisciplinary process providing a comprehensive and strategic approach to guiding the transition of business ownership.  It is one of the most important components of a business’ strategic process that provides a roadmap for estate and retirement planning, addressing trigger events such as death, disability and illness, securing the survival of the business through effective transition of ownership interests and maximizing the return of the retiring owner’s investment.

Business ownership is one of the most important ways to build generational wealth for families and their communities. A proper business succession plan is a document that’s used to outline who will take over the business in your absence, incapacity or death. 

Family Owned Businesses:

Family owned businesses are the single largest economic driver in the United States, creating more wealth and opportunity for individuals, their families and future generations.  Unfortunately, only 30% of family businesses will survive into the second generation, 12% remain viable into the third generation only 3% operate into the fourth generation.  These results are driven by the absence of a comprehensive business succession plan and waiting as opposed to starting the process early.

Various studies have revealed that 80% of business owners exit their business to retire and that 50-75% of a business owners’ net worth is in his/her business assets with the balance is in their personal real estate and financial investments.  Yet the sad truth is that 85% of family businesses have no business succession plan, 67% have no buy-sell agreement and only 29% have an estate plan.

Ideally, a formal business succession plan should be developed at the time of business formation and then be revised regularly. Early planning provides flexibility, allowing family’s succession strategy to alter course more easily if circumstances change. Our business succession planning attorney can help you accomplish your financial and lifetime goal

Considerations

When building out your long-term risk management and business strategies, there are a number of scenarios to consider when creating a succession plan.

First, ask yourself who would run the business if something happened, and you became incapacitated. If you’re in a serious car accident, for example, would a business partner or family member be able to step in to keep things running?

Second, consider what will happen to the business if you decide to retire. Depending on how the business has been structured, you could do any of the following:

• Pass the business on to another family member
• Sell your ownership share to your partner(s), or investors
• Sell the business to a third-party buyer
• Close it down/wind it up

Finally, think about the planning necessary in the event you pass away. In that situation, the options may be similar to those for your retirement planning.

A solid business succession plan should cover all three so that there’s no confusion about what happens  to the business if you’re not there to run it. It should also include  contingencies for helping employees make the transition and training  your successors in how the business is run, if necessary. 

Family Business Succession Planning Lawyer

We work with business owners to understand their individual and unique situation taking a multidisciplinary approach to the development and implementation of a comprehensive business succession plan.  We provide support and life-cycle management of the business succession planning process including the following components:

Components of the Business Succession Planning Process

• Establish business succession plan “exit strategy” goals and objectives;
• Evaluate options for succession, including determining management and ownership interests
• Develop plan that specifies disposition of ownership interests;
• In the case of marriage and family affairs, we use contractual tools such ap Prenuptial Agreements, Buy-Sell Agreements, and estate planning tools such as Wills & Trusts
• Develop and communicate your exit strategy;
• Facilitate the discussion with family members, including representing your interests in any disputes that may arise;
• Recommendation and preparation and of buy-sell agreements
• Sale to a third party;
• Prepare business contracts, employment agreements, non-compete;
• Coordinate exit strategy with wealth preservation and asset protection planning, estate planning, tax planning and retirement planning activities;
• Lifetime transfer strategies and options, gifting strategies, trust arrangements or other vehicles;
• Determine tax implications and incorporate tax strategy into process to minimizing tax liability;
• Minimize or prevent individual liability for business debts;
• Business valuation and strategies for maximizing value;
• Review and determine appropriate operating structure and tax aspects of entity;
• Collaborative member of business succession advisory team;

The health and longevity of a family business depend on early succession planning and on communicating the results of that planning in a timely fashion.  Planning efforts are a continued and dynamic process rather than a single event.  Our strategic approach to business succession planning we believe will increase the likelihood of the business becoming multigenerational and endure leadership and ownership transitions and deliver lasting value to the owners, family and other key stakeholders.

The day will come when you will relinquish you ownership interests to another party.  It will either be planned or unplanned.  The Obi Law Group can assist you in all aspects of establishing and managing all aspects of a comprehensive business succession plan.  Contact our business succession planning attorney  to discuss your business transition requirements today at 502-309-2512 or use the appointment link below to schedule an appointment.