BUSINESS SUCCESSION PLANNING – WHY NOW?

Are you a business owner?  If so, have you considered what might happen to your business if something happened to you tomorrow? Do you have a workable business succession plan in place in case you die, or as some might think, something even worse happens to you, you suddenly become disabled and no longer able to run your business?

If your answer to the last question was NO, then you should give serious consideration to implementing a business succession plan now, because one never knows what tomorrow will bring.

In its simplest sense, a business succession plan addresses how you get out of your business upon retirement, in the event you become disabled or in the event of death.  Most succession plans involve the sale of a business to a partner or employees, or inheritance by family members.

The primary reasons for business succession planning are to ensure:

●  that you are able to maximize the value of what you derive from the sale of your business, rather than conducting a “fire sale” should an unexpected event suddenly arise which requires such a sale, or

● the business is able to continue and succeed without your involvement.

Some of the things to consider in connection with implementing such a plan are as follows:

1.  Who is to succeed you in running and owning the business.

2.  If a sale of the business is involved, how will payment of the purchase price be made, and can the business revenues fund the purchase or will life or disability insurance be necessary.

3.  What are the tax consequences of the plan.

Unfortunately, a tag line a colleague of mine often uses to promote his services also accurately describes the consequences of not properly planning – “If you fail to plan, plan to fail”.

I have too often seen and been involved with situations where business owners fail to put a plan in place.  The result is that there are often years of litigation between family members as they fight over who is entitled to what when a business owner dies.  When there is no plan in place between unrelated business partners, there are often fights over how much the business is worth and how it will be paid.  Ultimately, such disputes frequently result in the demise of the very business being fought over.  Is this how you want what is probably your life’s work to meet its ultimate demise?

Even if you are prudent enough to put a succession plan in place, you must be sure to follow the plan.  That may require obtaining life insurance contemplated by the plan to fund a buyout, or may require setting a valuation on an annual basis to avoid disputes regarding value later on.

Just as starting and growing a business takes planning, providing an exit strategy, regardless of the reason, likewise requires planning.

If you have any questions or we can be of any assistance in formulating a plan for you and your business, feel free to contact us.