The success of a business is certainly not permanent.
But it can be very temporal without a succession plan. Because, you know, owners and officers are not deities; they do pass away like many of us normal human beings.
Usually, a company’s personality and success are reflective of the owner or founder. That culture is usually preserved through a small business succession plan. If there isn’t one in place, many companies will experience some chaos and uncertainty, which can affect morale, spook investors and hurt the company’s bottom line as productivity suffers – and even some innovation.
Simply put, it is tough to innovate when you’re scared and don’t know know what’s coming.
One of the best things for a business is certainty and stability, and if you are in a position to ensure that for your company, it would behoove you to contact a quality attorney to discuss a business succession plan and put the wheels in motion the company can remain productive, profitable, and open for the community.
What is Business Succession Planning?
The idea of a business succession plan is a concept in which business owners, shareholders, officers, and others work with an attorney to account for contingencies involving all of the human capital in that group – those who die, get disabled, retire or leave the company.
And as everyone in the group is human, they will all do at least one of those things, if not more than one (we’re talking about death, at least). What is uncertain, though, is when any or all of these events occur. And that is what business succession is all about – making the uncertain a certainty.
A business succession takes into account what happens in the event of an owner or major executive (CEO, CFO, CIO, etc.) moving on, developing a plan for shares, a seamless transition of the position to be filled and how any transition period would occur (for example, if the CEO passes, the CFO steps in until a permanent replacement is named, or perhaps the CEO’s wife or husband steps into the role – as stipulated by the succession plan).
What Might a Succession Plan Entail?
A good, well-designed succession plan first will have input by all of the senior management of the company, with the owner having priority decision-making in conjunction with an expert attorney. The succession plan can be vital in family-owned businesses as well as with larger corporations, and these plans are scalable according to business size and the model used. Some things that a succession could or should include are:
- If this is a family-owned business, should surviving family members retain the assets of the company? This is an important question if the business owner is the only one in the business, or if children or spouses are involved in the day-to-day operation of the company.
- A family-owned business is an asset in the owner’s estate. Part of the plan may include information about how the company should be handled in an estate – does the company go into a trust? Become part of a surviving spouse’s estate? What other mechanisms and tools are available to ensure the company gets passed on seamlessly with as little tax implication as possible?
- If the company has shareholders, and part of an executive’s compensation is shares of stock, what is the best way to handle those shares upon the exit of a key member of the company? Are the shares offered to other officers or shareholders first, or are they automatically put out to the market?
- How will surviving family members be handled by the company? If a family member works for the company, who will manage/supervise? If a family member is hired after the deceased owner/family member dies, how are the inherited assets handled, and are there positions the surviving family member can or cannot fill?
- Should the owner sell the company if the owner or some key executive dies?
Don’t Plan Succession by Yourself
Of course, this all sounds daunting, but don’t worry. First of all, some of these questions will not be relevant to your particular situation, while there are others not mentioned here that may be highly relevant. Your business succession plan will be comprehensive, and your attorney has the expertise to walk you through the entire process, asking you all the questions needed for your current business and your future plans.
As your company does not achieve success with only your hard work, your business succession plan does not have to rely solely on you to be successful, seamless, and secure. One of our attorneys will be by your side, along with our team of professionals behind the scenes, to help you perpetuate your company and culture for years to come, no matter what happens to you.
Your company is your legacy in your community. Preserve it with a solid business-succession plan, and contact us now for a consultation so you can have your plan in place before you become legendary.