Why Having a Business Succession Plan Is Important
July 26, 2022
A business is a vital asset. You want to make sure that your interest, or stake, in the business is protected. The last thing you want is to face the unforeseen and become incapacitated and unable to direct your business or transfer it to your loved ones. If you have no succession plan in place, the business could fall into the hands of someone unanticipated.
If it’s a sole proprietorship you’re operating, the key – in addition to having the proper legal documents in place – is to train a family member to step into your shoes at a moment’s notice. If your family has no desire for this, then you must train a key employee who can carry on for you in your stead.
This leaves the question of how to transfer the business and its assets to your family, which can be done through a will or living trust. Family transfers, however, can lead to fighting over who gets the business and who gets to run it. Even if you name a successor, other family members may object, and some may prefer just to sell the business and cash out.
Of course, you don’t have to leave the business to your family if you’re a sole proprietor. There are other routes that can be specified that will result in income for your loved ones, including:
Sell to a key employee. A key employee may be more than capable of running your business and turning a profit.
Sell to an outside party: Finding a broker to sell to an outside buyer is also an option, but this presents hurdles of its own, including obtaining a clear and acceptable valuation for the business.
Of course, all these options remain if you’ve just decided it’s time to retire. Even then, however, you should have the legal instruments in place to protect your estate – including your business – should anything befall you before the sale or transfer goes through.
What’s Included in a Succession Plan?
A will or living trust can transfer your ownership interest to your loved ones, but on top of that, you need specific instructions for the succession process, including:
A Timeline. If it’s for retirement or another reason, a date should be specified. Otherwise, it should be contingent upon death or disability.
Naming a Successor. You will need to name someone who should take over in your place, even if it’s just on an interim basis while the business is being sold.
Standard Operating Procedures: If the business is large enough, instructions regarding standard operating procedures (SOPs) need to be outlined, including copies of employee handbooks, an organizational chart, operations manuals, and more.
Business Valuation. State the value of your business and how it was obtained. This should be updated as circumstances change.
Funding. Explain the acceptable paths for financing, whether through loans or seller financing.
Business Succession Plan Attorney Serving Conyers, Georgia
When is the right time for a business succession plan? The answer is: as soon as possible. The same goes for estate planning. To plan for your future and the future of your family, as well as your business interests, Click here to Schedule a FREE Virtual Estate Planning Session. We will guide you through the entire process and help you understand what needs to be done to ensure your loved ones are taken care of. I have helped countless individuals gain peace of mind by creating a comprehensive plan. I proudly serve clients in and around Conyers, Georgia, including the neighboring communities of Covington, Snellville, Lawrenceville, Greensboro, Atlanta, Oxford, Loganville, and Grayson.
Be a Good Role Model
Young kids learn a lot about how to act by watching their parents. The younger they are, the more cues they take from you. Before you lash out or blow your top in front of your child, think about this: Is that how you want your child to behave when angry? Be aware that you're constantly being watched by your kids. Studies have shown that children who hit usually have a role model for aggression at home.
Model the traits you wish to see in your kids: respect, friendliness, honesty, kindness, tolerance. Exhibit unselfish behavior. Do things for other people without expecting a reward. Express thanks and offer compliments. Above all, treat your kids the way you expect other people to treat you.