Like death and taxes, a third truth is that eventually you will become unable or unwilling to operate your business. Your failure to plan for this eventuality could leave your family, estate and business at risk.
A business succession plan is merely writing down your thoughts on what should happen to your business if you become unable to operate it. The complexity of a plan depends on the type, size, nature, customers and employees of the business. Your co-owners, employees or family can use the plan not only to continue, sell or liquidate the business, but to locate and identify key business documents, information, customers and consultants.
Any business succession plan should include a list of potential buyers of the business or its assets; employees, managers, family members or others who could operate the business; where key information and documents are located; and contact information for key customers, suppliers, consultants and others who can help or need to be contacted. Having this information readily available could make the difference between a successful transition of your business or an immediate loss with a potential liability for your estate or family.
If you are a sole proprietorship, having a trusted friend, family member or employee prepared to step in to continue to operate the business could save you and your estate substantial money. If it is a family business, identifying and preparing appropriate family members and providing them clear directions may help sustain the business and its value for your family. If you are one of multiple owners, an agreement between owners, providing for a simple method of liquidating and paying you for your interest in the business should be prepared, and can include life insurance to ensure quick cash to your family and sufficient funds for the buy-out.
Saving the business or its assets for future operation or sale is not the only consideration in preparing a business succession plan. Customers, taxes, liquidity and liability for your estate and family should also be considered. In the situation where you are suddenly unable to operate the business, clear direction is the best way to provide for your family and heirs.
Brooks, Tarulis & Tibble, LLC advises business owners on various succession plans and preparing for emergencies. If we can assist you in this matter, please do not hesitate to contact me.