Like estate planning, business succession planning is something that many put off and deal with only as a last resort. But also like estate planning, if a business plan is not set up, the consequences to one’s loved ones could be extreme.
The livelihood of a business may change for many different reasons, including retirement, moving, death, divorce, or simply a change of heart. Should something happen to an owner or there is a fight between the partners, the business itself may curl up and go away. Those holding the bag will have to wonder what will happen to the employees, who work there, the clients who depend on the services and products offered, and the family and beneficiaries of the owner – all of whom depended on the success of the business. Several famous businesses have collapsed when inexperienced family members inherited the shares of stock of the successful corporation and expected the bounty to flow to them. Further, many business partners have jumped shipped when they realized they now had to deal with the spouse of a former partner and could not proceed with business as normal. A successful business succession plan can be set up to reduce these issues.
A successful business succession plan reviews the issues options available and determines the best route for success. It deals with contingencies of death, disability and the like, finds the appropriate successors for the now vacant positions, and ensures proper payment is had to the correct people amongst other things. It may also encompass different financial platforms including health care plans, life insurance, retirement plans and the like to create a package that not only deals with a possible death but also can be used for other purposes to help the business be financially stable and grow.
There are statistics that state the majority of us do not have our Wills, Powers of Attorney, Health Care Surrogates, Living Wills and other estate planning documents drafted. There are many reasons people give; however businesses, like families, should not be harmed by such delays. Unlike families, businesses are in the position to have the documents ready for such cases when the business is formed. These documents can be simple bylaws, operating and partnership agreements that clearly define what happens when certain circumstances occur. The documents can also include more complex shareholder and member agreements addressing other circumstances, issues and concerns that may or may not occur. A business is a child of the owner that needs oversight and supervision. As many point out - without the correct person reviewing the books and doing the work, a business will not be a success. Therefore the proper protection should be addressed in the governing documents.
Part of the fun of running a business is doing the work and seeing it succeed; however one must still have an exit strategy so the activities remain pleasurable and not a tiring event that must be endured. A business succession plan can help reduce one’s anxiety for the future and keep a person coming back for more. No one wants to see the worst case scenario occur, but planning for the worst and hoping for the best is a practice that allows people to sleep at night during these times of uncertainty.
