As a business owner you do your best to plan for everything that can adversely affect your business. You make sure to hire the right people, you only do business with trusted partners, and you position your business to outperform the competition. You work hard because that’s what brings success in the long term. But how do you protect what you have spent most of your life building? Many business owners don’t consider what to do with their business when challenges (such as CO-VID 19) arise or after they are no longer able to work. Moreover, you want to have something in place so that your business doesn’t fall into the wrong hands. Here are a few things that all business owners should contemplate, regardless of their business:
1. Withdrawal of an owner. Do you have a plan set in place in the event an owner (who may be the public “face” of the business) sells his or her ownership interest, retires or passes away? Will the business seek outside assistance? When and how will you communicate with customers, clients, employees, suppliers and vendors, etc.
2. Suitable successor(s) to your business. Do you have a partner or partners that will continue on with the business? Will the business be kept in the family, and are there family members with the desire, the competency, and the work ethic to run your business? If kept within the family, will the business be gifted or sold? How should you manage conflicts within the family? Is there a loyal employee who would be an ideal successor? Or do you look to sell to an outside party, who is interested in purchasing your business?
3. Giving more control to your successor(s). Starting this process isn’t “all or nothing,” and your successor(s) will need to be trained and learn this part of the business just as you learned it. You can begin to start the succession process while maintaining financial and managerial control, until you are ready to let go. Depending upon your financial situation there will likely also be tax implications that will help determine the best time to take certain steps.
4. Tax Implications. Have you considered the current tax landscape, and what path might be the best for both yourself and your successors as it concerns taxes?
5. Shareholder Agreement / Buy-Sell Agreement / Member Control Agreement. Without one of these documents you cannot control who can become an owner of your business. If you or any other shareholder becomes incapacitated, get divorced, or passes away, new individuals or companies can force their way into your business in ways you do not want.
6. Updating Your Plans. Continuation and Succession plans should be reviewed and updated from time to time as your business, industries, the economy, and society evolves.
We are experts at business continuation and succession planning and would be happy to advise you on these issues and any others that may impact your business.