How To Be Successful At Business Succession

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.

Women Leaders in Business: The Bottom Line

Do women have it tougher than men in the corporate world? Many signs point to yes, but a 2015 report released by New York analytics firm MSCI suggests companies with strong female leadership show greater returns on equity than those without.

The report found companies with strong female leadership held a 2.7% return on equity advantage over those without a similar leadership profile (10.1% vs. 7.4% respectively). And businesses that lacked gender diversity in board positions faced more governance issues than the average.

While the report doesn’t establish a clear causal link between female leadership and overall corporate performance, traits such as innovation and good decision-making were associated with gender diversity at the corporate board level. And that diversity is much more prevalent in companies with a female CEO. The report suggested the possible causes for such a link include increased social networking, greater cultural diversity, and the breakdown of the typical institutional barrier to women taking leadership roles in the workforce.

The connection between strong female leadership and higher returns on equity could have its basis in cultural diversity (board diversity in particular), greater social networking, and the breakdown of the perceived “glass ceiling” women reach in the workforce. When combined, these traits encourage inclusive thinking, innovation, a higher respect for individuals, and collaborative decision-making. With fewer societal barriers like gender inequality and discrimination, board members and employees have a better chance of working together to achieve success.

If your company is looking for a healthier bottom line, whether you have female leadership or not, consider the value these traits hold for your business and how to implement them. Think of ways to implement structural change to reduce the barriers to healthy decision-making and innovative thinking your company faces. While you’re at it, identify and eliminate other significant barriers to success such as legal liabilities or financial instability.

Female business leaders might still encounter glass ceilings in the workplace, but the fact is, their contribution can lead to higher returns on equity, increasing the value women have in the business world overall. If you want to maximize your returns on equity, begin by sitting down with us. As your Creative Business Lawyer®, we can help you identify opportunities for achieving leadership diversity. We can also help you put valuable legal and financial protections in place to ensure your company is protected, so you can focus on growth, potential, and all the reasons why you love doing business.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®. 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, financial, and tax systems you need for your business. Call us today to schedule.

The Foolproof Training Method to Expand Your Business

One of the most critical components to building a company, as opposed to a solo practice, or even a business where you are managing everyone and everything, is to learn to step into your full leadership.

A primary key to that leadership is your ability to train your team so that you can confidently delegate key tasks and responsibilities that will free you up and allow your business to grow.

As a business owner, management is not the highest and best use of your time, energy, and talents. Carefully selecting support staff and then training them using a business model that emphasized leadership over management is an effective place to begin.

Most business owners train their team members using a project management style of training. Specific tasks are given, followed by specific instructions on how to do those tasks. The next logical step is for the owner to then monitor whether the tasks were done to the proper specifications.

This is not leadership. It’s project management. Using this model, the people you’ve hired will be disempowered, and you will get stuck in the role of babysitter, rather than leader.

Steve Jobs, former CEO of Apple put it well when he said, “When you have really good people, you don’t have to baby them. By expecting them to do great things, you can get them to do great things. A-plus players like to work together, and they don’t like it if you tolerate B-grade work.”

Unless you want to be your company’s project manager, micro-managing details and always feeling stuck in the weeds, there’s an alternative methodology for training your team members that will establish your leadership and get the results you want, right from the start.

Outcome, Resources, Deadlines, and Check-Ins

When you are bringing on a new team member, instead of giving them specific tasks and specific ways to perform those tasks, and then holding them accountable to those tasks, give them outcomes, resources, deadlines, and check-ins.

Here’s how that looks:

First, identify the specific outcome the company needs.

For example, we need to publish a weekly article to our website and then send it out as a newsletter to our clients. Or, we need to send out a monthly newsletter to our clients each month. Or, we need to use this tracking software to ensure that everyone who calls our office gets a response weekly, monthly, quarterly, and annually.

Second, give the team member the specific company resources available to meet this outcome.

In our case, using the weekly article as an example, I would let the team member know where I’ve found or curated articles in the past. Or let the team member know to ask me for the article each week. I would then give the team member a login to our website and the service we use to send out the newsletter. I would also provide a document with standards for posting the weekly article and sending out the newsletter.

Third, give the team member a deadline.

Let your new team member know specifically when he or she is expected to have this outcome completely handled without any input from you. Then, let your team member begin, with you working in parallel, also completing the task yourself as a transition period, and set a  deadline date for the team member to take it over completely.

Finally, schedule periodic check-ins between the time that the outcome is given and the deadline date.

This allows the team member to communicate challenges  and identify any missing information.

This method allows your new team member to get in there and just start figuring it out, and make some mistakes (which is a key part of learning) while also having the support necessary to fill in any gaps in the training or resources.

Still not clear? Imagine you are trying to teach someone to tie their shoes. You could explain it for hours and hours. You could even show them how to do it. But until they get their hands on the laces,play around with them and make mistakes, they won’t ask for help – and they won’t learn to tie their shoes.

Make a shift today from the project management style of training and into the leadership style of training and watch your business expand. As your Business Attorney, we can help you to make decisions around your hiring process and ensure you are bringing A-level people to your team, to allowing this effective leadership style to be effortless.

This article is a service of Gratia P. Schoemakers, 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, financial, and tax systems you need for your business. Call us today to schedule.

Steps You Can Take Now to Create a Succession Plan

Many small businesses are family owned. While family owned businesses enjoy the benefit of familial solidarity, their strength is often threatened when it’s time for leadership to be passed down. Succession plans help ensure the transition from owner to owner is an easy one, but many small and family-owned businesses do not have such a plan in place.

You may think that succession planning doesn’t reap immediate benefits, and as a result overlook it as a critical component of your current business success. However, what we’ve repeatedly found is that succession planning now strengthens your business, supports it to grow now and allows for the longevity and legacy you desire.

And, the best part of succession planning is that it can allow you to chart the vision for your future, as the business owner, so that you can begin to experience the freedom you may have desired when you first started your business.

Growth

Employees brought in from outside the company (and the family) might become disappointed with the opportunities—or lack thereof—for growth. A family-owned business that cannot attract talent to take the reins and keep the company viable throughout a leadership transition is risking a lot and can keep your company from the growth you desire.

Small-business owners need to clarify each employee’s role, including its limitations. Being upfront about the room for growth from the beginning can help employees make the most of their positions and allow them also to be clear about what they want out of the role and how they want their talents to be used. Small business owners should be flexible when attracting top talent. If they are not able to provide them room for growth, they should be sure the position is worthwhile in other ways if advancement is not a possibility.

Reluctant Leadership

When a business owner starts from the ground up and sacrifices years of time and money to grow his or her business, it can be hard to let it go. Some business leaders are reluctant to retire because they have a psychological investment in the company. This can create significant barriers to succession planning before it’s too late.

Begin by creating a phased transition plan. A phased transition plan can help you to retain some involvement while incoming leaders learn the ropes. This works to break down the barriers in passing the baton. Easing out of and into new roles creates a more successful transition as the incoming leader takes time to get to know and understand how the current leader sees the future of the company.

If you are ready to create a succession plan, start by sitting down with us. As your Creative Business Lawyer®, we can guide you in making the difficult decisions you face every day as a leader in business, including when and how to hand off leadership roles. We can look out for your business’s future, so you have time and energy to focus on growth and expansion.

This article is a service of Gratia P. Schoemakers. We, at GP Schoemakers, PLLC, 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, financial, and tax systems you need for your business. Call us today to schedule your private and confidential session and find out your business LIFT status.

The 4 Deadly Legal Mistakes Small Business Owners Need to Avoid

Small businesses dominate the American business landscape, but those that survive several generations are relatively rare.  If you are a small business owner, you need to be sure you are not committing any of these four deadly legal mistakes:

  1. Mixing personal and business finances. If your small business started as a hobby or a sideline but has grown to a point where it is your main source of income, you need to consider forming a legal entity for it, like a corporation or limited liability company (LLC).  Most small business owners choose an LLC for the personal liability protection it provides without the formalities of a corporation.  An LLC also makes it easier for you to transition the business to other partners or future generations and since it is taxed as a pass-through entity, profits are not taxed separately but instead flow through to the owner.
  1. No employment agreements. Employment agreements should be used to spell out expectations, especially in family-owned businesses that may have been funded by one or more family members who expect reimbursement or those who expect a job at the family firm based on nothing more than a familial relationship.
  1. Failure to obtain proper licenses. Most businesses are required to have local, state or federal licenses to operate, with fines assessed for those that fail to get these licenses.  They are generally inexpensive but are often overlooked.  Check with your city or county offices to see if your business requires a license to operate.
  1. No succession plan. If your business has no formal legal entity, it will pass when you do.  Many small businesses fail to last through the first generation due to the lack of a succession plan.  Consult with a Creative Business Lawyer® about creating a succession plan for your small business, so the value you have built over the years is protected after you are gone.

We can help you discover if you have what it takes to start your own business and guide you through the steps to successful entrepreneurship. Whether you are new to entrepreneurship or already operating a business, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.

 

The Family Business: Avoid These 4 Lethal Legal Mistakes

If you operate a family-owned business or are considering starting one up, there are four potentially lethal legal mistakes you should take care to avoid, including:

No employment agreements.  Family members who work together are usually hesitant to confront one another if someone is not pulling their weight.  Having an employment agreement for everyone ensures that expectations for job performance are spelled out and what the grounds are for termination.

Mixing family and business finances.  Many family businesses start with loans from various members, and as the business grows, those initial investments need to be protected.  This is the stage when you want to consider setting up your family enterprise as a limited liability company (LLC) or a corporation.  Most small businesses use an LLC structure, which provides liability protection for personal assets and allows for company profits to flow through to owners.

No licenses.  Even if you operate out of your home, you will likely need to obtain a local, state or federal license to operate your family business.  While licenses are generally inexpensive, the fines for not having them can be costly.  You can find out what the requirements are in your area by contacting your city hall or county office.

No succession plan.  Family business feuds can easily occur when there is no succession plan in place.  Also, legally speaking, if a business has not been incorporated or formed as an LLC, the business dies when its owner does.  If you started a family business to keep it in the family, you need to follow through with a formal succession plan.

Having a business attorney who understands the individual needs and unique circumstances of your company is key to helping your business thrive and prosper. If you are interested in learning more about legal protection strategies for your business and how we work with you as a partner in protecting your company, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.

Insurance Considerations for Small Businesses

Opening a small business brings excitement as well as uncertainty. As a small business owner you face many risks, but there are steps you can take to protect yourself against them. Obtaining insurance coverage is one big way you can protect your small business and help minimize many of the risks you face.

The kinds of insurance you will need to protect your business will vary based on what type of business you run, how it is structured, and where its potential liabilities fall, so make sure you speak with a lawyer about what specific protections your business needs.

At a bare minimum, if you provide services, you should have professional liability insurance to cover you against negligence claims from errors or omissions. If your business produces a product, you will also need products liability coverage. This coverage will protect you if you are sued because a defective product harmed someone.

If you have employees, even just one, you also need to have workers’ comp insurance. This covers medical care, disability and death benefits for an employee who was injured or killed as a result of the work. And, you may want to consider employment practices coverage, which will pay for you to have a lawyer represent you if you are ever sued by an employee, which is one of the biggest lawsuit risks you have as a business owner.

Most businesses also need some form of property insurance. If you have a home-based business, some losses may be covered by your homeowners’ insurance, but be sure to check your policy thoroughly. And you will definitely need separate insurance to cover business assets such as inventory and equipment.

You will need vehicle insurance if you have a vehicle for your business. Your personal auto insurance policy may cover you for some limited business use, but you won’t be covered if the vehicle is used primarily for business purposes. Make sure you optimize your policy to suit your businesses’ needs.

Business interruption insurance covers your day-to-day losses in the event you experience a closure or some other barrier to normal operations. This can help keep you afloat while cash flow is reduced.

And, of course you will want to consider personal insurance, such as disability coverage for yourself, in case you cannot work, and life insurance, as well, to cover your family and business in the event of your death.

As you can see, there are several types of insurance coverage for small businesses. Businesses in certain industries, such as manufacturing or logistics, may need additional insurance policies to cover industry-specific losses.

Knowing what types of insurance you need and the amounts that are right for your business and family is crucial, and it is not uncommon for business owners to need help with this step.

A good place to start is speaking with a trusted legal advisor who can help you determine what kinds of legal risks you face and what kind of insurance you need. Sit down with us as your Family & Business Lawyer to discuss how to best protect your business. Choosing the right insurance package can make all the difference in your business’s stability and security.

This article is a service of Gratia P. Schoemakers, Family & Business Lawyer. 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, financial, and tax systems you need for your business. Call us today to schedule.

Do You Have a Business Succession Plan In Place?

As a business owner, you’ve taken on a big responsibility to your family, your clients/customers, your team and your partners. Most businesses are not sufficiently liquid to keep the company going and the owner’s family thriving, in the event of death. But with the right plan in place, you can ensure the people you care most about are well provided for if anything happens to you.
While facing death is not the most pleasant prospect, doing so can actually make your life and business a whole lot better. A life and death plan – also called a succession plan – for your business will ensure you have:

  • Enough insurance (and the right kind of insurance) to provide cash to keep your business going in the event of your death;
  • A written plan to designate who will run your business (or prepare it for sale), when you are no longer able to do so;
  • Documented access to your digital business assets so your business can continue to serve customers, collect payments and pay expenses;
  • A plan to keep your business (and your family) out of probate court, which is totally unnecessary and avoidable;
  • An updated inventory of your business and personal assets so nothing you own is lost to the State Department of Unclaimed Property and so your intellectual property is well-protected and capitalized upon;
  • The story of your business, written, video or audio recorded, so you can leave a documented legacy of the lessons and experienced you learned along the way.

With a succession plan in place for your business, you can rest easy knowing that if anything happens to you, the people you care about most — your family, clients and customers, your team and partners — will be well cared for, in just the way you want. The peace of mind  which comes with that knowledge frees you up to focus on creating more income and a bigger impact now.

Creating and documenting a business succession plan is truly a win-win-win situation.  If you are ready to set up yourself, and your business, and the most important people in your life to win, no matter what, we can help you accomplish just that.  We’ll ensure you get from where you are now – no matter what stage your planning is in currently – to exactly where you want to be. That’s our commitment to you.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®. We offer a complete spectrum of legal services for businesses and can help you structure your operations for success. One of our primary services is a LIFT Start-Up Session,™ in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate.  Call us today to schedule a time to have a conversation!

 

Your Family Business Legacy Matters Enough to Do These Three Things

Your family-owned and run business can be the greatest gift or the greatest burden to the people you love, if and when something happens to you.

If you’ve planned well and properly for your business to be continued, managed or sold, it will be the gift that keeps on giving and shows your family just how much you cared about them.

If you have not planned well and properly, it will be the gift that keeps on taking and creates an energy, time, and resource drain that costs your loved ones years of headache and leaves them with a nightmare of a mess to clean up.

Fortunately, you are reading this article now and there is still time to take these three actions that will make it far more likely your family business legacy creates the outcome you desire.

Organization and Formalities

One of the key elements in creating a family business legacy you can be proud of is organization and following formalities you think may not apply to you.

The truth is that with a family business, it’s even MORE important to follow the formalities. Your family deserves it.

This means having an updated operating agreement governing the operations of the family business, clear terms with any partners, in writing, taxes up to date, and clarity regarding who takes over and how when something happens to you.

Some things to consider: Who will be in charge of daily operations? Who will make personnel decisions? What about inventory? What is the chain of command? How will clients and customers be handled? If you have partners, will they buy out your family after you are gone? How? In what time frame?

Considering the answers to these questions now will save your family a huge amount of stress and leave them with the biggest gift you can possibly give them.  If you do not want to deal with it now, imagine how they will feel dealing with it after you are gone and be willing to do what’s hard. We can help and make it far easier.

Communication

How do you know what to communicate about and who to communicate it with?

In most cases, not knowing has left you mute. So here’s your list, and if you don’t know what to say, call us to help.

First, communicate with your team members to let them know you have a plan for what to do if and when something happens to you and let them know the plan!  Then, communicate with each of the people you’ve named in your plan so they know what to do if and when something happens to you.

If you do not yet have a plan to communicate, call us, we can help.

 Integrate the Younger Generation

In most cases, the key to a successful family business legacy is to involve the younger generation sooner than you think it’s necessary and beyond your comfort zone.

When you can involve the younger generation by inviting them into a conversation and connection about the business early on, in a way that has them feel appreciated, you’re on the path to creating something far more than what you have now.

Integrating the younger generation can be a challenge, if you do not know how to meet them where they are, so contact us for support when you are ready to do it.

It’s worth it to ensure that the hard work you have put in over the years to build your business will be there to support the people you love, rather than leaving them with more work to clean up the parts you weren’t willing to face.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®. One of our primary services is a LIFT Start-Up Session,™ in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate.   Call us today to schedule a time to have a conversation!

 

 

 

 

Overcoming Small Business Challenges through Operational Strategies

As with so many things in life, some of the same qualities that help small businesses succeed, can also lead to their demise. Fortunately, much of that risk can be lessened through operational excellence.

For example, the owners and managers of small businesses often know each other before they go into business together. Sometimes, they’re even related. Preexisting relationships can help propel small businesses forward, especially when there are high levels of trust and competence.

Unfortunately, however, familiarity is sometimes accompanied by a lax attitude toward operational formalities. Owners and managers may skimp in critical areas such as:

  • Governing documents such as articles of incorporation, partnership agreements, and bylaws;
  • Solid or regular auditing and accounting practices; and
  • Shareholder meetings and minutes.

In worst-case scenarios, business and personal funds are commingled or used for improper purposes.

The good news is that if you are just starting out, it is easy to avoid all of these issues and the accompanying potential for lawsuits and tax problems. A Creative Business Lawyer® can provide trusted advice and help position a small business in the most favorable circumstances for that unique business.

Here are some examples of the services a trusted legal advisor can provide:

  • Assistance in identifying recordkeeping products and in establishing high quality recordkeeping practices;
  • Helping owners understand the potential consequences of a lack of proper documentation;
  • Ensuring that clients know the deadlines for business and tax filings; and
  • Explaining the importance of keeping personal and business finances separate.

Perhaps most importantly, a skilled business lawyer can help you structure your operational strategies properly. This can be invaluable in helping your business avoid pitfalls and liabilities along the path toward success. We like to begin with getting to know your whole business, not just the legal side; but, also truly understanding your revenue model, how it serves your life, your team and your clients. Then, we can advise you on the best strategies for a business that meets not just your business objectives, but serves your life as well.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®. We offer a complete spectrum of legal services for businesses and can help you structure your operations for success. One of our primary services is a LIFT Start-Up Session,™ in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate.