What Is Business Succession Planning?
A succession plan is a strategy that allows a business to be passed from one owner to another.
It can take many shapes:
- Some businesses are passed on to the next generation
- Some businesses are sold to competitors
- Some businesses are bought by employees
Each path presents different challenges, and offers unique opportunities from the risk management and estate planning perspectives.
Good business succession planning will actually be dual plans that specify what will happen if everything goes as anticipated when the current owner retires or sells out, and a backup plan that can be implemented quickly in case of an emergency. The best plans will integrate seamlessly with a business owner’s estate plan so neither the business nor the family suffers undue hardships so matter which plan is implemented.
Crafting An Emergency Plan
An emergency plan should be developed first in case the current owner is suddenly incapacitated or passes away. At its core, it needs to:
- Identify who will take over the day-to-day business operations
- Specify what resources are available and what actions can be taken to carry the business through any related fiscal problems. Often, this is done by securing a line of credit and insurance policies
- Touch on what sort of message can be conveyed to customers, employees, and lenders to reassure them that things are under control despite the sudden change in leadership
Focusing on the emergency plan first forces business owners to really think about who could step up and actually make a go at running their businesses. Often, they are surprised to realize that the person they are counting on to take over in the long-run is ill-equipped for the task. This is where the business succession planning rubber hits the road. Our firm can draft whatever documents are needed to legally transfer a business from one person to the next, but it is the business owner’s responsibility to make realistic plans and to lay the groundwork so that those plans can be successfully implemented.
Why Implementing A Long-Range Plan Is Ideal
Using insights gleaned during the emergency plan planning process to inform the long-range planning process helps business owners put together a realistic plan. Sometimes, the emergency plan planning process so alters the business owner’s perspective on who should take over the business that the long-range plan becomes a slow-motion version of the emergency plan.
Whatever the business owner’s long-range plan includes, the first stage must involve communicating the plan to key stakeholders. The kids should know they should be preparing to take over the family business if that’s the plan. If it would be better for an employee to buy the business out over time, the employees should know this is the plan, so they buy into it and are incentivized to work hard to make the company grow. If the business will be sold off to the highest bidder, employees should know that too. They may not like the idea, but knowing will help them feel more secure in their future, even if that future is uncertain.
We help business owners think through all of this and put into place the legal documents and processes that will make a plan a reality.
Weaving Together The Succession Plan And The Estate Plan
Many of our business succession planning clients are also our estate planning clients. When a business is closely held, or is the main asset someone is relying on to fund their retirement and their end-of-life care expenses, one must carefully weave the succession plan and estate plan together.
We, of course, focus on the legal side of things, but we are happy to work with financial planners, business advisors, insurance brokers, and accountants to ensure that the succession plan will not delay retirement and that retirement will not tank the business. We also help business owners put into place the legal documents necessary to transfer decision rights should the business owner become incapacitated.
Comprehensive And Confidential
Working with a business owner to craft both their succession plan and their estate plan means we know basically everything about our client’s life. Including their hopes and dreams and future goals. This sort of intimate relationship is not typically in business relations, and it makes some of our clients uncomfortable at first.
It is therefore important to us to note that we treat all of our clients with the utmost respect and would never do anything to betray the trust that has been placed in us. We are discreet, professional, and unwaveringly loyal. A secret shared with us, be it personal or business-related, is one we keep.
Contact Our Experienced Dallas-Fort Worth Succession Planning Attorneys
The Law Office of Carey Thompson, PC has a well-earned reputation in the business community for integrity, fairness, diligence, and putting the best interests of our clients first. We know that you want to focus on running your business, not filling out paperwork or managing legal risks, so we make things as efficient and economical as possible on our end. If you need assistance crafting or implementing a succession plan or incorporating a succession plan into your estate plan, contact our office today for a consultation.