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.
We’ve heard business owners say, “Oh, I don’t need to worry about that now. Retirement is a distant dream!”
But business succession planning 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.
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, give us a call at (732) 281-0060.