Estate Planning Probate
Business Succession Planning
Businesses need leaders. No company, corporation, partnership, or other business entity can survive without leadership. In the event that the leader or leaders of the business becomes ill, dies, or retires, businesses that do not have a cohesive and well thought out business succession plan struggle to regain their traction and maintain their current direction. No matter the size of the business, all businesses need succession plans for when adversity strikes.
Business succession planning involves more than simply planning who is going to take the reins once you are gone. It includes planning carefully and considering the talents, skills, and assets of your current employees. It also allows you to examine what your successive family members or long-term employees are assuming is going to happen.
And of course, tax consequences, and how the business succession plan will affect your businesses overall bottom-line, must be considered. The four basic reasons for succession planning in general are: 1) providing liquidity for owners, 2) minimizing estate taxes, 3) providing for the continuation of the business, and 4) providing for family members.What are Some of the Pitfalls I Should be Concerned About?
From our experience, nothing is worse than having your vital employees or successive family members assume they are entitled to a new role or position within the company simply because you are now gone. Such common pitfalls are easily avoided through proper business planning. For example, business leaders can manage expectations by laying out a clear and succinct plan for how the transition is going to move forward once the leader steps down.What are Some Business Succession Planning Objectives?
At Ogden Law Firm, PC, we strive to make sure that there are no unsaid or unspoken assumptions. Successive planning requires an open dialogue and strategy for all the successive employees and family members. Due to the sensitive nature of succession planning, successful business planning requires careful consultation with family and long-term employees to eliminate assumptions and feelings of entitlement.
In any case, the objectives of most family business succession plans are: 1) an exit strategy for the owner, both in terms of an income stream and asset base to meet financial requirements both while in control and on retirement, 2) wealth transfer to convey ownership of the business to the succeeding generation with the least amount of tax liability and the highest asset value, and 3) business continuity.
As business law and estate planning attorneys, we can also help business owners consider and plan for the general business and tax consequences of your plan. We can tailor your succession plan to fit your needs through a variety of different techniques. These can include direct gifts, both through annual exclusion gifts and larger gifts, use of trusts, stock redemption valuation, minority interest and lack of marketability discounts, installment sales, private annuities, self-cancelling installment notes (SCIN), spinoffs, split-offs, and split-ups, and recapitalizations.
If you need assistance in your business succession plan, contact us and we would be glad to help you.