Business Succession Planning: Things to Look Out For

If you have a business, you might want to pass that business on to your family, successors, or heirs. But on the other hand, you actually may not want to do that–after all, your family may not be qualified nor equipped–nor have the desire–to run your business, even if you leave it to them in your estate planning documents.

This is why people suggest, as part of an estate plan, drafting a business succession plan. A business succession plan, if properly ratified and approved by your business (and which doesn’t conflict with your existing business and corporate documents), will take precedence over any conflicting provisions in your will or estate plan.

You may think that a business succession plan is just saying who will inherit your business when you pass. But it’s more than that, and a successful business succession plan must account for things that you might not have thought of.

Temporary Control – Yes, you will say who gets or owns the business in your business succession plan. But while ownership is being transferred, there may be decisions that have to be made, contracts that have to be signed, or money transfers to be effectuated.

You don’t want your business in chaos, during this transition period. That’s why some emergency, temporary provisions, with temporary owners or leaders or managers, should be in place, while the succession plan is waiting to go into effect.

Mentoring or Third Party Help – If you are leaving the business to someone who you want to run it, but they aren’t up to speed on how to do that, you may want to designate (and leave funds for), a consultant or mentor–someone who you may not want to inherit the business, but who can help the person that does inherit, get up to speed on running the business effectively.

Insurance – Much like traditional life insurance, your business can also have a policy which pays it, in the event a key person passes away. If you are that key person, you might want to look into this, which pays for any loans the business has, pays continuing bills, and generally does what is needed to keep the business afloat, during a transition period.

Note that you can also get this insurance, in the event of the disability of a key person, even if there is no death.

Buy Sell Agreements – You may want to have in effect a buy sell agreement, whereby if the company does not want your loved one or designated beneficiary to take over and run or manage the business, the business can buy out your beneficiary’s interest.

This can be helpful because you can leave your business to loved ones, who may not want to run your business. They now know that they will have the option of getting a cash amount for their inherited interest in the business–and the business doesn’t have to work with someone that they may not want to work with, or who they don’t want being an owner of, the business.

Your estate plan is more than a will or a trust. Call the West Palm Beach probate attorneys at The Law Offices of Larry E. Bray today if you have an estate planning issue.

Source:

westernsouthern.com/life-insurance/what-is-a-buy-sell-agreement