Business Succession Planning: An Overview

Business Succession Planning: An Overview

This is the first in a series of posts that will be discussing business succession planning. Something that small business owners should be considering is what happens in the unlikely scenario of a long-term disability or death of the business owner? Business succession planning is one of the mechanisms by which we as attorneys, alongside your accountant and/or financial planner, start to plan out a few scenarios that could unfold in the unlikely event that you are unable to continue working in the business, whether in the short term or permanently.

Let’s lay out some fundamental aspects that folks need to understand. Business succession planning is like a will, but it is not actually a will for your business. Business succession planning involves a number of will-like features in terms of describing what you want to happen with the business that you own. But, there are other aspects that are involved that take it outside of the will or estate planning purposes.

One of the interesting things I have discovered through research is that even if a small business owner has a personal will, often times that person does not address what to do with the business to keep it functioning. They often think that they would like a family member to own the business, but do not provide direction as to how that would work. A business succession plan needs to take into consideration many factors.

This may be difficult for business owners to hear. If you’ve been around for a few years and you have some great, competent employees, chances are that your business can survive and thrive in your absence. That can be hard to hear, but it is generally the truth. A number of small business owners think that their kids will take on the business. Often times family businesses do well when transferred from parents to children, but not necessarily to grandchildren. You may have heard of S.E. Johnson and how they are a 7th generation family business, or Perdue chicken which is a 4th generation family business. Those businesses, however, are the exception. Most small family businesses do not survive a third generation. This could take place due to a lack of connection to the business or lack of understanding of business logistics.

When we talk about business succession planning we talk about many scenarios. In the upcoming blog posts we are going to talk about disability and death of the business owner. Contact us today to get started on your business succession plan.