Keeping your business going over the long-term requires the application of viable business solutions, including a business succession plan. While you may start planning this yourself, working with the skilled business succession planning attorneys at KJK can help ensure the smooth transition of your business to the next generation of leaders.
KJK advises on creative business succession solutions to help you stay on track now and in the future. Whether you are a mid-size to large company or a small family-owned business, KJK provides you with the specialized succession planning guidance necessary to navigate complex issues and avoid making costly mistakes.
Important to Know:
What Is Business Succession Planning?
Succession planning for your business is the detailed process of preparing for the transfer of control of the business to another entity or person. This transfer should be minimally disruptive to current business operations and maintain or enhance its value while maintaining compliance with state and federal laws.
With all the time and effort you’ve put into building and growing your business, you want it to continue. There is a time in every business lifecycle when you will need to transition control of the business to others for a variety of reasons, including retirement, illness, disability or death. It is imperative you establish a succession plan that ensures your hard work will continue to pay off further down the line, whether for yourself in retirement or for future generations of family members.
Planning your exit directly impacts your assets, lifestyle, tax obligations, employees and family members. The sooner you engage in the business succession process, the less worry or stress you will have when you finally retire. KJK guides you through the process, providing options for transferring control without disrupting your business and creating a smooth transition at the appropriate time.
Common Issues of Business Succession Planning
An efficient business succession plan addresses many issues including business valuation, identification of leadership, key employee retention, family member roles and tax implications.
These are just a few of the issues you can encounter when creating a succession plan for your business. Additionally, you may need to consult with the KJK team about other matters concerning your succession planning, including: Buy-sell agreements, Non-compete agreements, Stock options, Life insurance arrangements, Deferred compensation arrangements, Wealth transfer via trusts and other estate planning vehicles, Tax planning and Estate planning.
A business valuation is very often a key component in developing a succession plan. While your business’ value changes over time, knowing what it is now serves as a benchmark for planning purposes. If you plan to sell the business in the future, having a valuation will assist with financial projections, coming up with a sales price, and identifying viable purchasers. KJK works with you and other advisers to determine a business valuation at the start of your succession planning and will help you monitor and revise it as you move closer to a transition.
Potential Future Owner and Manager Identification
In many closely held businesses, the owner or founder has already identified the next generation of leadership, especially if they plan to pass it to another family member. If you have not already done so, you should identify individuals to fill these roles. To help with this, consider creating the following steps:
- Establish measurable criteria for evaluating a candidate’s potential
- Look across departments, functions and teams to identify potential successors
- Determine future interests and goals of these potential candidates
- Develop a training and development plan for each potential successor
- Stay involved in the potential successors’ progress
Key Employee Retention
Changes in a business often lead to key employees moving on, disrupting normal day-to-day operations, especially for a business in transition. To ensure key employee retention, consider coaching and developing leaders within the business, encouraging or incentivizing them to stay and lead when you’re gone. You may also consider establishing a mentoring program to help monitor the progress of potential leaders as well.
Family Member Roles
If your succession plan includes transitioning management or ownership to the next generation in your family, identifying key roles and developing essential business skills are essential. If you plan to transfer ownership of the company after your death through your estate plan, consult with an attorney who specializes in estate and business succession planning. KJK’s Estate, Wealth & Succession Planning team can help.
Succession Plan Communications
Keeping a succession plan a secret is never a good way to proceed. To ensure as little disruption as possible in your business, you need to communicate elements of your succession plan to key stakeholders long before you leave.
Let them know there is a plan in place, showing you care about the company and its longevity. Explain the strategy behind the plan and the benefits to the organization and the employees overall. You also need to keep key stakeholders updated on changes or revisions to the plan, including new metrics or deadlines.
One goal in business succession planning is to minimize transfer taxes. KJK will help you understand the tax implications of a transfer and strategies to minimize them.
Why you Need a Succession Plan
Without a well thought out succession plan, any stake you have in your business could unintentionally be passed on as part of your estate or assumed by other shareholders. This can lead to the jostling of priorities and family disputes about how to go forward. Your best employees may leave because of the chaos, creating a void in business operations that could result in financial losses and business interruption.
It is critical to have a solid business succession plan in place for a smooth transition before you exit the business. KJK works with you to develop the goals of the business and outline the steps to take. Issues to consider include:
- Continuing family involvement by creating a retention plan that allows family members to retain assets or shares. You also may consider a family employment plan.
- Offering a stake in the business to loyal employees or shareholders, granting them the right of first refusal.
- Ensuring continuity in business operations and preserving institutional memory, to avoid service disruptions to your clients.
- Ensuring adequate cash flow to pay obligations, taxes and other expenses during and after the transition.
We’re Here to Help:
Protect Your Businesses Future with KJK
The best solutions to afford a successful business transition require the advanced knowledge and experience of KJK’s Corporate attorneys. We help protect your legacy by advising on the best succession plan for your business. Contact us to start creating your business succession plan today.