Palm Springs Law Blog

Wednesday, February 3, 2021

Should You Have a Business Succession Plan?

There are many things that go into owning a business. One such thing is a business succession plan. A business succession plan is a legal document that provides what is to happen should there be a change in ownership of the business. By having a business succession plan you can move forward knowing that your interests are protected.

Many business owners tend to put off the creation of a business succession plan until they are nearing retirement. However, this is not good practice because no one can be sure what will happen tomorrow. That’s why it’s best to have a business succession plan in place as soon as possible.

As a business owner you must expect the unexpected; hope for the best but prepare for the worst. A succession plan gives instructions as to what should be done, which can help reduce confusion and best protect your business, its employees, and your loved ones.

There are a variety of things that you can dictate in a business succession plan. You can designate the new owner(s) of the business or explain how you want to sell the business, whether it’s to an existing co-owner, employee(s), or a third-party.

If a family owns a business and the individual responsible for operations becomes incapacitated or passes away suddenly, it can be extremely challenging. That’s why it’s important to consult with a California business and estate planning attorney as soon as possible.

What Happens if an Owner Doesn’t Have A Succession Plan?

For businesses that don’t have a legally enforceable succession plan, the owner’s portion of the business will automatically pass to his or her heirs as a part of the estate. If he or she has no heirs it will pass to other shareholders.

For family-owned businesses, one of the biggest problems with not having a business succession plan is that it can cause issues among members of the family. One individual may believe that they deserve more of the business than they received. By establishing a business succession plan you can put much thought into how you want things to move forward and your loved ones can take comfort in knowing that the business is being passed just as the owner desired.

If your goal is to sell the business then you can explain everything regarding the company’s operations procedures. But if you don’t want to sell the business you can designate someone to be the new owner.

You can also set things up so that the business will transfer the owner’s interest in the business into a trust (or trusts) that can then pay out to family members over a period of time. Another option is that the assets of the business can be divided among employees.

Heritage Legal, PC Helps Those in California to Plan for the Future of their Businesses

A qualified estate planning attorney can listen to your wishes, provide legal advice, and assist you in the development of a business succession plan that works best for you.

At Heritage Legal, PC, we understand the importance of protecting your interests and the interests of those whom you care about most. We can help you to create a business succession plan that fills all of your needs and plans ahead for your business. To learn more or to schedule a free consultation, contact us today!

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