Berge & Berge, LLP Blog

Tuesday, July 17, 2018

Entrepreneurs - Do You Have a Business Succession Plan?

You are a successful entrepreneur. You took a chance, poured everything into your start-up, and you built a successful and growing business. However, do not lose sight of the importance of planning for the future. It is easy to become so engrossed in the day-to-day business operations that you forget that there may come a day when you will need to exit your business or pass your business on to another person. Unfortunately, we all need to play for illnesses, injuries, incapacitation, and death. For a business, this means that you need a business succession plan.

Our California business succession plan lawyers can help you plan for the unexpected by developing a business succession plan that diminishes the negative impact your exit from the business may have on your employees and your family. Developing a succession plan for your business is a crucial element of a business plan, estate plan, and retirement plan.

What is a Business Succession Plan?

A business succession plan is much more than a written document. It is the process of planning for the future of your business, even if you are unable to operate the business for any reason. Regardless of your reason for exiting the business, your plan ensures that your business can remain a successful venture and that your heirs are not burdened with a huge tax bill or overwhelmed by a business that they do not know how to operate.

One reason for creating a business succession plan is to choose someone who will assume the leadership role when you step aside or no longer are able to operate the business. By choosing this person now, you can take steps to train this person and prepare this person for the leadership role that he or she will inherit once you exit the business.

In some cases, a business succession plan provides a set of instructions for heirs to assist them in selling the business, closing the business, or choosing an outside management team to operate the business. Your business plan may involve selling the business to a key employee who is interested in continuing the business if your heirs have no interest in the business. The choice is up to you; however, you need to make a choice now and put a detailed plan in place for carrying out that choice before the need arises for a succession plan.

Basic Elements of a Business Succession Plan

Because your business is unique, there will be certain elements in your plan that may not be included in another business succession plan. However, these basic elements are usually included in most plans that our California business succession plan lawyers help draft for our clients:

  • Choosing whether to transfer the business to an heir/employee, sell the business to a third party; or, close and liquidate the business;

  • Choosing a person to assume the leadership role if the business will continue operating;

  • Determining a method for valuation of the business when you exit;

  • Choosing how to handle the manner of your exit from the business (i.e. retirement, death, or incapacitation);

  • Strategies for maximizing the value of the business;

  • What are the roles of key employees and strategies for retaining those employees once you leave; and,

  • Legal considerations and taxation issues.

Contact Our California Business Succession Plan Lawyers for More Information

Schedule a consult with the Law Offices of Berge & Berge today. Our California business succession plan lawyers can help you develop a business succession plan that meets your needs and goals. Contact our office to discuss how we can help you protect the company you have worked so hard to develop.

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