Does Your Small Business Have a Succession Plan?
You’ve worked hard to establish and build your small business. But what happens to your business if something happens to you? Who will take over if you become incapacitated or die? Don’t make the all-too-common mistake small business owners make by failing to plan for the succession of your business.
Why You Need a Succession Plan
If you want your business to continue on after you, you need to plan for the continuation of the business with a succession plan. Planning can help ensure that your business continues to operate in accordance with your vision after you are gone, that control of the business goes to those you trust, and/or that the business is sold for a fair price.
In addition, as a small business owner, it is likely that a significant portion of your personal assets are tied up in your business, and your family may depend on the income from your business. What happens when that income is gone? Just as you plan for the distribution of your personal assets after your death with an estate plan, you need to have a business succession plan so that your heirs can get the benefit of the full value of your business and the work you put in to create it.
Notably, estate taxes can be significant, representing a large chunk of the value of your business. They may be difficult to pay if the business does not have significant cash flow or sufficient liquid assets at the time of your death. This can result in an inability of the business to operate and/or hamper the ability to sell the business for a fair price. If the business folds upon your death and you have not done the proper planning, you may even leave your heirs owing estate tax on a defunct business.
There are also many favorable IRS provisions available to small business owners if they have planned properly. A small business or tax lawyer can help you to ensure that your business succession plan takes these IRS rules and tax consequences into account.
Transitioning Ownership and Control
One of the major items to cover in your succession plan is the transition of ownership and control of the business. If you own a family business, you may desire to pass your business on to your family so they can continue to operate it. But don’t assume that this will happen automatically – or that it is as simple as it may seem. For example, if you own a family business but some of your children are involved in the business and others are not, you may want all your children to share equally in the business after your death or you may prefer to distribute shares of the business according to each child’s contribution to the business.
If you have partners, your share of the business may pass to your heirs, leaving your partners stuck running the business with unqualified or unwanted partners. Or, alternatively, suppose one of your partners is the one who dies suddenly, and no succession plan has been established for your business – you may be stuck with their spouse or children as your partners, which can be a daunting prospect.
Your business succession plan should take questions of ownership, control, and management of your business – or sale of the business to third parties – into account. A qualified small business lawyer can help you determine which options are best for you, your family and your business, and create a succession plan that reflects your preferences.
It’s important to consult with a lawyer when developing your business succession plan for these reasons and more. Find the perfect small business lawyer for you and your business by quickly posting your legal needs on our site our site. Significantly, it can take some time – often years – to get an effective business succession plan in place, so the earlier you start, the better.
Additional Small Business Legal Resources
Do You Need An Attorney?
If so, post a short summary of your legal needs to our site and let attorneys submit applications to fulfill those needs. No time wasted, no hassle, no confusion, no cost.