Many people have simple estate planning needs, but if you own a business, you’ll also need an individualized business succession plan that allows you and your business to move into the future with confidence. A Clarksville estate planning attorney will help you create that plan.
What do business succession plans accomplish? Why is such a plan so important for business owners to establish? When should a business succession plan be in place? If you’ll keep reading, you’ll learn what business owners in Tennessee should know about business succession plans.
If you are a Tennessee business owner, you cannot wait until retirement to establish a business succession plan. We cannot know what tomorrow will bring, so you should make establishing your business succession plan a top priority.
What Does a Business Succession Plan Do?
Then, if the unexpected happens, the plan will instruct others about what measures they should take, and it may even keep your business open – and flourishing – for its employees and for your own loved ones.
When you create a business, you know that it’s worth more than mere dollars and cents. A business succession plan helps your family take advantage of their options so that your business proceeds with minimal interruption if you are incapacitated or after your retirement or death.
No business can survive for long without active, capable ownership or management. If the manager or owner passes away, is incapacitated, or can’t lead the operation for any other reason, the business could face unpaid debts and unmet obligations.
If Your Business is Family-Owned
Family-owned businesses can suffer if whoever manages the business on a day-to-day basis becomes incapacitated or unexpectedly passes away. A Clarksville business planning attorney can help you create the business succession plan that’s right for your business and family.
A business owner must prepare for the future. As the business increases in complexity and size, the need for a thoughtful, concise business succession plan is even more critical. The best plan benefits everyone – the business owner, the successor, employees, and customers too.
What Should a Business Succession Plan Accomplish?
At a minimum, your succession plan should designate the next owner or owners. It may provide directions for the sale of the business – to a third party, one or more employees, or someone who’s currently a co-owner – when that time comes.
With family-owned businesses, a succession plan can keep disputes from emerging among family members. Proper business succession planning takes time and thoughtful consideration but is always worth the effort.
A business succession plan for a family business may need to ensure that your spouse or children have specific rights in the business upon your incapacity or death. The plan may even include employment contracts and terms for any family members who will manage the business.
If you intend to sell your business, your business succession plan must clearly explain the company’s standard operating procedures. Whatever your intentions for your business may be, a good business planning lawyer can walk you through the business succession planning process.
Should You Include a Buy-Sell Agreement?
If your business has several owners, you may consider creating a buy-sell agreement so that upon any owner’s death, the other owners automatically purchase that owner’s interest. A buy-sell agreement ensures that a deceased owner’s beneficiaries do not become owners unintentionally.
If you are the sole owner and you are not selling the business, your succession plan should name the next owner. This is one way to care for your loved ones when you’re no longer here, but succession planning for an heir to inherit the operation entails its own complications.
Giving your business to an heir usually increases the taxes, but a good Tennessee estate planning attorney will work to ease that tax burden to make it as low as possible.
What Does a Business Succession Plan Include?
If a corporation has not established a succession plan, the shareholders may not be able to purchase the shares that become available. Disputes may emerge; profits may decline. When a person with management responsibilities must be replaced quickly, can the business do that?
Every Tennessee business is different, so a business succession plan must be customized. Even so, every good succession plan, at a minimum, includes:
- The determination of a timeline: Succession plans can take effect on a chosen date or upon the owner’s incapacity or death.
- The designation of a successor: Should you transfer your business to your heir, you must name that heir in the succession plan.
- The standard operating procedures: Standard operating procedures should be presented in an employee handbook, operations manual, or some other appropriate document.
- Precise details regarding the transfer of ownership: Explain in the succession plan exactly how a sale or other transfer will be conducted.
How Will a Business Planning Attorney Help You?
Arrangements can be made that transfer a shareholder’s or owner’s interest in a business into one or several trusts that pay out to family members over time. Or, if a business owner wishes it, assets may be split among a company’s employees.
Whatever your plans for your business might be, reliable legal advice and services will be needed. Creating the business succession plan that’s right for you and your business and family requires an attorney with considerable business and estate planning experience.
After a lifetime of building your business, there’s no reason why it shouldn’t continue to succeed after you’re gone. Having a business succession plan enhances the likelihood of success and lets you decide if the company should pass on to family members, employees, or a third party.
When Should You Speak to a Business Planning Lawyer?
Do not place your business and its future at risk. To create the effective business succession plan that is most appropriate for your own business, obtain help from a Tennessee estate planning lawyer who also handles business planning and business succession plans.
If you are a Tennessee business owner – or a shareholder – your succession plan for your business or shares needs to be included as part of your estate plan. The time to establish your business succession plan – and the time to establish your estate plan – is now.
And if you have already established your succession plan, now may be the time to reassess and update that plan. The right Clarksville estate planning attorney can ensure your original succession plan is still appropriate or make any necessary changes to the plan.