Entrepreneurship is not for everyone. Only a certain type of person has the particular set of skills, and is willing to take calculated risks and work tirelessly to build a successful business from scratch. One risk you should never take is leaving the future of your business to chance.
As you grow your company, consider how you will structure ownership so that it can be transferred over smoothly when you retire, pass away, or if you should become disabled. Or consider the possibility that passing on your business while you are living may be the best succession strategy you can employ.
Whether you have a large company with a complex structure, a simple internet business, or a small brick and mortar operation, competent legal advice is necessary. One of the reasons for creating a succession plan is to give you the peace of mind you desire to ensure that your business is transferred into the right hands or that loved ones will be taken care of out of the money produced from the ongoing operations or the sale of the company.
To ensure the succession of your business beyond you (and that your legacy is fulfilled), you will have several options, including selling your business outright, creating an agreement to sell after a certain triggering event like your retirement, or transferring through a living trust.
Each one of these options comes with its own set of considerations such as tax liability for the successor, and who will make ownership and operational decisions at what time.
No matter which route you choose, planning early is a must because it will allow you the time you need to implement a phased transition plan. Even if retirement seems far off and you are more focused on revenue and profitability than trusts and buyout agreements, consider your succession plan along with your business goals. Do you want family to be involved in the company leadership or just benefit financially from the transfer?
Very few people feel comfortable simply handing over the keys to a kingdom that they have put so much time, effort and money into over the years. A gradual transition will allow you to share your vision with the succeeding leader, transfer necessary knowledge, and provide you with time to see if they are indeed up for the task.
An experienced lawyer can be a valuable advisor not just regarding the law, but also by advising you based on what they have learned has worked for other companies like yours. Owners can often get emotional about their businesses, having invested so much of themselves over the years. While skilled counsel will take your entire experience into account (emotional, financial, etc…), they will also provide valuable objective legal advice from an outside perspective.
Of course, your business is not just about your financial life and that of your loved ones. Planning your exit strategy involves the employees, customers and merchants with whom you have built relationships over the years. You will want to explore all options to determine the best path for all of the stakeholders in any given circumstance, be it retirement, death, dissolution or divorce.
Start creating your succession plan today by sitting down with a Business Lawyer, who can guide you in making these difficult decisions. They can look out for your business’s future leadership, so you have time and energy to focus on current growth and expansion.
This article is a service of Gratia P. Schoemakers, Estate and Business Attorney. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Call us today at 832.408.0505 to schedule.