If a key person dies, becomes ill, or retires, the business may scramble to find a replacement. Business succession planning helps avoid disruption by preparing for leadership + ownership changes in advance. Large organizations + small businesses alike can avoid a tumultuous transition by proper planning.
Without a Business Succession Plan…
In most states—especially Nevada and California—business owners need a clear succession plan in place. Without one, ownership may pass to heirs, be absorbed by other shareholders, or both.
In family-owned businesses, this often leads to disputes between siblings and other relatives. Family members who’re active in daily operations may feel entitled to a larger share than less involved stakeholders.
In larger companies, employees and clients may leave the company for fear of instability. Additionally, without planning, remaining shareholders may lack the funds to buy out a departing or deceased owner’s shares.
Without planning, a deceased shareholder’s spouse or child may inherit an ownership stake in the business. This can lead to disputes, stalled operations, or even loss of assets. If the departing shareholder held a management role, their replacement may not be prepared to take over.
With a Business Succession Plan:
The Business Planning Team at Phillips Ballenger, including attorneys Tiffany Ballenger Floyd and Katarina J. Arthur, have a great deal of experience with business planning issues and how they relate to owners’ overall plan.
We can help owners and shareholders establish a plan that facilitates a smooth transition and minimizes conflict. Business succession plans typically follow input from employees, shareholders, and family—and a clear outline of future company goals.
At Phillips Ballenger, Business Succession planning can be tailor-made to fit any business model and should address the following issues:
- Keep the Business or Shares Within the Family. This way, a spouse, children, or other relatives can retain control of assets.
- Offer Shareholders + Vital Employees a larger stake in the company. This approach gives the parties named in your plan the right of first refusal. The succession plan should outline how to determine share value in advance. For example, shares may be priced at market value or based on multiple professional appraisals.
- Estate Planning. A business succession plan can address issues related to your estate plan. It can also help minimize potential estate taxes.
- Preserve “institutional Memory”. Involve trusted advisors in your business succession plan.
Your advisors can guide the transition team and maintain day-to-day operations. This also helps plan for heirs not involved in the business by providing alternate provisions. They can also offer training to family members & key employees to take over leadership roles. - Financial Planning. A business succession plan can establish measure to ensure for adequate cashflow. This can ensure the company has funds to pay taxes or buy out a deceased owner’s share of the company.
We can help make additional arrangements to support your business succession goals. For example, we may transfer a business owner’s interest into a Nevada Trust for distribution to family members.
Read More – Business Formation + Business Planning…
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With so many moving parts, it’s essential to consult an experienced business planning attorney to protect your interests.