If you own a business, you need to start thinking about business succession planning. Even if running the business seems to take every moment of your day, it is essential to take the time to have a plan in place for what would happen if you, for whatever reasons, could no longer run your business. At The Matus Law Group, our experienced New Jersey estate planning lawyers can assist business owners with comprehensive succession plans. We understand the importance of safeguarding the future of your business and ensuring a smooth transition. Contact us at (732) 281-0060 to schedule a consultation and secure the future of your business with effective succession planning.
We’ve heard business owners say, “Oh, I don’t need to worry about that now. Retirement is a distant dream!”
But one of the important things to remember in business succession planning is that it isn’t just for your retirement. Most people want their businesses to continue on after they are gone, and to continue benefiting their loved ones and employees. It determines what would happen to your business if you pass away suddenly or if you become incapacitated. Proper business succession can make the settlement of your personal estate quicker and easier. It also gives you the opportunity to protect your employees from having their livelihood liquidated or taken over. So, when you decide to start your business succession plan, what do you need to consider?
Choosing a Successor
The more of an active role you have in the company, the more difficult choosing a successor can be. If you are active in the business, you should choose someone who is capable of playing your role. This may be a business partner, or it may be your adult child or another family member.
Is your role in the company more in name at this point than in actual management? Don’t want to choose a successor? It is also possible to sell your portion of your business to the other partner or partners in a buy-sell agreement.
Know the Value of the Business (or Your Share of It)
If you don’t want to leave your share of your business to a successor, you’ll need to know its worth. This lets you know in advance the price tag for which it would be purchased in a buy-sell agreement. Business value can be calculated by a CPA. It is also for you and your business partners to agree to a price together in writing at your own discretion.
Purchasing Life Insurance
As a part of a solid business succession plan, all partners should purchase life insurances so that death benefits proceeds can be used by living partners to buy out the deceased partner’s share, should the need arise.
Succession Planning in Family Business
Effective succession planning is vital for ensuring the long-term continuity and prosperity of a family business. It entails developing a strategic and well-structured process to transfer leadership and ownership from one generation to the next. Several key considerations should be taken into account during this process.
- Balancing control and collaboration: In family businesses, conflicts over control and power can emerge. Successful succession planning establishes clear timelines and decision-making authority to prevent breakdowns. Clearly defining outcomes allows emerging leaders to exercise autonomy while balancing the founder’s vision with adaptability.
- Embracing the next generation’s perspectives: Bridging the generational gap in family businesses requires embracing the perspectives of the next generation. Involving younger members in discussions about wealth, business, and philanthropy promotes communication and prepares them for succession. Early engagement of the next generation fosters collaboration, trust, and transparency.
- Strengthening intergenerational solidarity: Early engagement and open conversations about joining the family business are critical for a smooth succession. Communicating growth opportunities, sharing company history, and aligning priorities with the aspirations of the next generation increase the likelihood of a successful transition. Building strong bonds between generations and creating mutually beneficial scenarios for entering the family enterprise are essential.
- Fostering high-trust behaviors: Trust is fundamental during family business transitions. Establishing trust, competence, and credibility is crucial for confident power and authority transfer between generations. Implementing criteria for enhancing competence and addressing trust gaps promotes collaboration and effective transition plans.
- Co-designing readiness standards: Assessing the readiness of the next generation is crucial in family business transitions. Collaboratively designing what readiness entails aligns both parties and instills confidence in assuming leadership roles. Succession planning should incorporate desired skills, attributes, and work experiences. Involving the next generation in the transition planning process promotes alignment, collaboration, and trust, ensuring a stable future for the business.
A New Jersey estate planning lawyer can play a crucial role in succession planning for family businesses by facilitating the development of effective strategies. At The Matus Law Group, our lawyers can help family businesses navigate the complexities of succession planning and secure a prosperous future. Schedule a consultation by contacting us today
| Key Considerations for Succession Planning in Family Businesses | Description |
|---|---|
| Balancing control and collaboration | Establish clear timelines and decision-making authority to prevent conflicts over control and power. |
| Embracing the next generation’s perspectives | Involve younger members in discussions about wealth, business, and philanthropy to bridge the generational gap. |
| Strengthening intergenerational solidarity | Engage the next generation early, share company history, align priorities, and create mutually beneficial scenarios. |
| Fostering high-trust behaviors | Establish trust, competence, and credibility for confident power transfer between generations. |
| Co-designing readiness standards | Collaboratively assess the next generation’s readiness and incorporate desired skills and experiences. |
Ready to create a business succession plan?
If you’re ready to create a plan for how your business should be handled in your absence, you need to work with an experienced attorney. The team at The Matus Law Group is eager to help. To get started, contact us and give us a call at (732) 281-0060.
