Owning a business can allow control over financial success, expanded creative freedom and an ability for growth that may be stifled in large corporations.
When the business owner retires, what happens to employees, clients and family members all depends on what the business owner has planned, asks an article from Florida Today titled “Estate planning for business owners: What happens to your business when you leave?” One task that no business owner should neglect, is planning for what will happen when they are no longer able to run their business, for a variety of reasons.
The challenge is, with no succession plan, the laws of the state will determine what happens next. If you started your own business to have more control over your destiny, then you don’t want to let the laws of your state determine what happens, once you are incapacitated, retired or dead.
Think of your business succession plan as an estate plan for your business. It will determine what happens to your property, who will be in charge of the transition and who will make decisions about whether to keep the business going or to sell it.
Your estate planning attorney will need to review these issues with you:
Control and decision-making. If you are the sole owner, who will make critical decisions in your absence? If there are multiple owners, how will decisions be made? Discuss in advance your vision for the company’s future, and make sure that it’s in writing, executed properly with an attorney’s help.
What about your family and employees? If members of your family are involved in the business, work out who you want to take the leadership reins. Be as objective as possible about your family members. If the business is to be sold, will key employees be given an option of buying out the family interest? You’ll also need a plan to ensure that the business continues in the period between your ownership and the new owner, in order to retain its value.
Plan for changing dynamics. Maybe family members and employees tolerated each other while you are in charge, but if that relationship is not great, make sure plans are enacted so the business will continue to operate, even if years of resentment come spilling out after you die. Your employees may be counting on you to protect them from family members, or your family may be depending upon you to protect them from disgruntled employees or managers. Either way, do what you can in advance to keep everyone moving forward. If the business falls apart the minute you are gone, there won’t be anything to sell or for the next generation to carry on.
How your business is structured, will have an impact on your succession plan. If there are significant liability elements to your business, risk management should also be built into your future plans.
To make your succession plan work, you will need to integrate it with your personal estate plan. If you have a Last Will and Testament in a Florida-based business, the probate judge will appoint someone to run the business, and then the probate court will have administrative control over the business, until it’s sold. That probably isn’t what you had in mind, after your years of working to build a business. Speak with an estate planning attorney to find out what structures will work best, so your business succession plan and your estate plan will work seamlessly without you.
Reference: Florida Today (Feb. 12, 2019) “Estate planning for business owners: What happens to your business when you leave?”