Why Is It Important to Have a Business Succession Plan?

naperville business lawyerMany business owners are focused on managing their day-to-day operations, and while they may make plans for the future, these plans will likely address the planned growth of the business and how to meet the challenges they may face. However, it is also a good idea to consider what should happen when an owner decides to leave the business or retire at some point in the future. A business succession plan can ensure that an owner will be prepared to sell their business should the need arise, or they can make sure the business has the right people in place when leaders decide to retire or move on from the company. With the right plan, owners can be prepared to address a company’s changing needs due to shifts in employment trends during the COVID-19 pandemic and beyond. Should an owner choose to sell their business, they will likely be able to fetch a higher price if the business is fully prepared to succeed under new ownership.

Options for a Business Succession Plan

A succession plan will usually include a business valuation, ensuring that owners or partners fully understand the value of their ownership shares of a business. An owner will also want to make sure they have fully documented the company’s policies and procedures, including employee handbooks, training manuals, and other forms of documentation. A timeline for succession can be created that details the steps that will be followed as ownership and management of the business is handed off, ensuring that the business’s operations can continue successfully.

Business owners may have multiple options for transferring their business to one or more new owners, including:

  • Selling their shares to partners or employees – If a business has multiple partners, a buy-sell agreement may be created to allow other partners to purchase the shares of a partner who leaves the company. An owner may also plan to bring a key employee into the business as a partner and arrange for that employee to assume ownership after the current owner retires or leaves the company.
  • Passing the business to heirs – A business owner may make arrangements to pass ownership of a company to one or more family members in the event of their death, or they may plan to have loved ones take over their business after their retirement. This option may be used when an owner’s relatives have been involved in a family business. A succession plan can help avoid confusion about the leadership structure of the business and the division of ownership shares between multiple heirs.
  • Selling the business to a new owner – After calculating the market value of a business, an owner may be able to transfer ownership to a buyer who will assume control of the company. In these cases, a succession plan can ensure that management of business operations can be transferred successfully.

Contact Our Naperville Business Succession Plan Attorney

Business owners can work with an attorney who provides outsourced general counsel to ensure that have a succession plan in place. At the Gierach Law Firm, we will get to know your business and provide guidance on the measures you can put in place now and the steps you can take to plan for the future. We will make sure you are prepared to address any issues that may arise, and we will help you take steps to ensure your future growth and success. Contact our Illinois business and estate planning lawyers at 630-756-1160 to learn how we can help you create a business succession plan that will meet your needs.

Sources:

Investopedia

Fit Small Business

Kiplinger

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Please note: These blogs have been created over a period of time and laws and information can change. For the most current information on a topic you are interested in please seek proper legal counsel.

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