What is business succession planning, and why is this an important and essential component of forming any new entity or protecting an existing business interest? Business succession planning protects everything you’re working to build by ensuring sound corporate management and decision-making continues if you are injured, disabled, or after your passing, and assets are effectively managed and protected during the process. The end of the calendar year is a common time for businesses and business owners to review corporate governance and compliance issues, including an up-to-date business succession plan. There are also key moments in a business owner’s life that add urgency to these tasks.
Key Takeaways of Why Business Succession Planning Protects Everything You’re Working to Build:
- Every company and its owner(s) should have a plan for what will happen if one of its leaders/owners is injured, incapacitated, suffers a serious illness, or unexpectedly passes.
- Business succession planning protects everything you’re working to build, ensuring clear plans are in place to maintain continuous operations when an unexpected event occurs in an owner’s life, protecting the organization’s existing value and viability, as well as the asset itself.
- An effective business plan should clearly and thoroughly describe the circumstances under which and when a successor would step in to temporarily or permanently run the company. The plan should standardize your company’s operating procedures, valuation processes, and succession funding, such as life insurance or other forms of security.
Just How Well is Your Company Positioned to Weather an Unexpected Challenge?
Every viable corporate entity, especially small companies and closely held businesses, should have an effective, up-to-date business succession plan. How well is your business positioned to survive an unexpected illness, incapacitation, the loss of its owner, the introduction of new (and potentially inexperienced) equity owners and associated voting rights, and the valuation of interests to be passed to heirs and beneficiaries?
Business succession planning protects everything you’re working to build, all the money you have and will invest in the venture, as well as the hours, days, weeks, months, and years of your life you give to make it a success. Janathan Allen works with each client to tailor a business succession plan to their unique situation. A strong plan should be developed at the outset of an entity’s formation, and updated regularly to clearly and comprehensively describe the circumstances under which and when a successor would step in to temporarily or permanently run the company. The plan should standardize your company’s operating procedures, valuation processes, and succession funding, such as life insurance, key person insurance, disability insurance, or other forms of security.
Some of the Important Questions of Business Succession Planning
Why do you have this company? What are your ultimate goals for this enterprise? Do you intend to develop an asset that can be sold at some point down the road? Are you working to build a legacy for your children, family, or close associates? How will the company continue to operate profitably and deliver on its vision and commitments if something happens to its owner or key management personnel? What insurance may be needed to provide liquidity and stability?
Are there any existing successors, children, key trusted employees, or partners who are prepared to step into a leadership role if something happens to an owner or leader?
How will an ownership position be managed in the event of a “triggering event” such as serious illness, death, incapacitation, divorce, or bankruptcy? Do you want or need ongoing income, or are you planning to sell your interest in the company? Who has the option to purchase an interest, and how shall the valuation of that transaction be established?
What happens if one of these triggers occurs in the life of a partner, or there is a substantial disagreement between the primary owners of the company?
Protect All You’ve Built and the Personal and Financial Investments You’ve Made
Business succession planning protects everything you’re working to build, and all of the time, money, labor, and personal effort you’ve invested to date, and will invest in the future. Business succession planning provides peace of mind and protects the fruit of your life’s labors. The experienced business, trust and estate planning, tax, and corporate formation attorneys at Janathan L. Allen, APC, and supporting business advisory and accounting experts at Allen Barron, Inc. are uniquely positioned to guide you through these matters and work with you to develop a strategy to protect all that you’ve worked so hard to build.
Our effective business succession planning protects everything you’re working to build while ensuring that operations continue as smoothly as possible in the event of a significant life challenge, divorce, dispute, incapacitation, or passing.
We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470. Learn about the issues associated with business succession planning, and the ease with which you can protect your company and preserve its valuation and operational success if you are disabled, or at the time of your passing.
