Business Succession Planning for Small Business Owners

Small business owners are the backbone of the American economy. Small and family-owned businesses represent over 90% of all businesses in the United States and employ more Americans than all of the big corporations combined.

But, only 28% of small business owners in the United States have a succession plan in place. This is unfortunate because succession planning is the one thing that will ensure that the business they have worked so hard to build will continue on after they retire.

What’s more, the continuation of your business affects more than just you and your business. It affects your family, your employees and their families, your customers, and the community where your business is located.

The Importance of Business Succession Planning

Because you have invested so much of yourself into growing your own business, you have a right to be proud of the result of your efforts. But, have you prepared your business for a smooth transfer of ownership or control, so that you can step away in the future, on your own terms?

Ask yourself:

• What would happen if you were forced to take 6 months off work due to a serious injury or illness? Would your business survive?
• What if you die suddenly? Are you sure that your business partners would give your family a fair deal?

A succession plan is like a Will for your business, and like any other Will, it is important to have it in place before you need it.

What Does a Good Business Succession Plan Include?

Although each business is different, the key aspects of a good succession plan are largely the same from company to company. Some things your business succession plan might include are as follows:

• A buy-sell agreement funded with life insurance, so that your family is provided for financially;
• An updated valuation of your business by a certified business appraiser;
• A contingency strategy, in case you become disabled;
• Training for the individual or individuals who will fill your role when you retire or become incapacitated;
• An equalization strategy that will be useful when one child wants to take over your business, but you want to make sure that your other children are left assets of the same value; and
• A holistic estate plan that fully incorporates your business succession plan.

If you already have a plan in place, make sure you review it regularly to ensure that it remains up-to-date, that it reflects your business’s current value, and that it remains in line with your wishes.

How an Experienced Attorney Can Help

The importance of a well-drafted business succession plan cannot be overstated. What’s more, hiring an experienced attorney to assist you may be the difference between a business that flourishes well into the future and one that struggles when you (or a partner) retire, become incapacitated, die, or otherwise leave the business.

An attorney who is experienced in business succession planning can help you with:

1. Choosing a suitable successor;
2. Developing a training plan for your chosen successor;
3. Establishing how the interest of an exiting owner will be valued;
4. Implementing your business succession plan and integrating into your overall estate plan.

In addition, a good attorney will have the expertise to draft a sound buy/sell agreement, powers of attorney, and other documents that will protect your interest in the business, but ensure that it will continue to operate smoothly through sudden and unexpected changes.

For help creating a business succession plan for your small business, call us today at (703) 553-2577 or use the contact form on our website, to arrange a no-cost, no-obligation consultation with a knowledgeable and experienced attorney.

The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.