If you are the owner of a business, you know that you can’t run it forever. Like taxes, retirement and death are sure things. When your business has outlived you, many people—clients, employees, vendors, investors, family—are all going ask the same question: “who is in charge now?” A well drafted succession plan provides the answer. This gives you and your business’s stakeholders peace of mind that your venture’s success will continue seamlessly after you have left.
The question of who will take over the business vary with each owner. Some would like a son or daughter to take over. Some might prefer to keep ownership in the family but hire out the management. Others may prefer to leave the reins with a loyal, key employee. This should not be left to chance. Every business owner should have the proper legal documents in place to effectuate the transition.
Through the use of estate planning instruments like wills and trusts, business owners can confidently ensure that their ownership stake in their companies will be passed down to the persons of their choosing. A properly drafted will or trust also provides the freedom and flexibility to preserve the ownership for a loved one, say a minor child, who is not quite ready to take over the family business but one day will be. Trusts can also be used to keep the ownership (and financial benefits) within the family, but provide the flexibility to hire the right management personnel to run day-to-day operations. In addition, well-drafted operating agreements and employee stock purchase agreements can allow business owners to ensure a smooth transition of ownership during their life to the persons of their choosing.
In the absence of a well-thought out succession plan, your heirs, whomever they are, will ascend to ownership of your business, which may or may not be good for your family or your business. Accordingly, it is wise to plan for who will succeed you in your endeavor and get the appropriate documents in place.
At Smith Jadin Johnson, we advise numerous business owners on these plans and would be happy to discuss the right plan for you and your company.
Contact us today with questions.