Estate and Business Succession Planning for Business Owners
Business succession planning generally involves addressing who will succeed the management and ownership functions of the business as well as the disposition of ownership interests if you are unable to due to death, disability, divorce or retirement. The plan may include details addressing how to transfer or modify your interests in order to make such transitions as clear and seamless as possible. Detailing these matters in advance can eliminate much of the stress, confusion, and possible litigation which could arise in absence of succession planning. Some key issues that should be considered include:
- Who will succeed your business roles and functions?
- Are your successors properly trained and experienced to take over those roles and functions?
- Would other owners or key personnel get along with your successors?
- Should your successor be a family member, existing business insider, or someone currently outside of the business?
- Will your successors share your vision for the company?
- How long will the transition between you and your successor take?
- Will you remain fulfilling a role at the business for a period of time before your successor assumes full responsibilities?
- How will your succession plan operate in the event of your unexpected disability or death?
- How should company assets, bank accounts, investments, and property be titled to ensure a smooth transition?
- Will your successors be able to access your company’s digital assets in your absence?
- Do you hold any specific state licensing requirements that may impose additional succession planning considerations?
- Who will receive your stock ownership or financial ownership interest in the business?
- Should the business itself or other owners of the business purchase or be given the option to purchase your ownership interest?
- Do your existing business documents such as an operating agreement or corporate bylaws already address some of the issues involved in succession?
- How transparent should you be about your business succession planning?
- How will your ownership interest in the business be valued?
- How might the sale of your ownership interest impact your taxes?
Woods Law Group designs custom plans for business owners and entrepreneurs looking to protect the continuity of their business interests. We’ll work closely with you to understand your vision and wishes and customize a plan that ensures the business you’ve built, along with your assets and investments, are protected and seamlessly passed on as you wish.
Documents involved in succession planning generally include powers of attorney, buy-sell agreements, non-disclosure agreements, and general estate planning documents for all the owners of the business. Some of the documents involved will naturally depend on the type of business entity that makes up your business. Corporations often must adjust their corporate bylaws and shareholder agreements. LLCs may need to modify their operating agreement or member agreement. Partnerships will generally need to examine and reconsider their partnership agreement.
Your customized business succession plan will include all documents necessary to legally state how, where, when, and to whom your assets go, plans for incapacity in terms of health care and financial decisions, and any asset protection, new or existing business interests, planning for more complex assets such as restricted stock units (RSUs) or qualified retirement plans and more — depending on your needs.
A business succession planning attorney at Woods Law Group can help you through this process and explain the potential issues unique to your situation and give advice on how to best address those issues.
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