Consider the life cycle of your business: formation, growth, stewardship, and succession. Formation involves the where, what, how and why. Why determines the potential exit strategies: succession.
Yes, you should consider succession strategies early in the process. Who will take over your company? How will this event be funded? What benchmark achievements spark future talks of succession? Retirement or death? Age or years of service? Perhaps a dollar value as a goal.
Succession planning manages the risk of partial ownership transfers to undesirable partners, or, loss of value to your estate. Do you want to prevent an angry litigant from seizing your partner’s shares? Or would you rather have your family receive cash instead of stock in the event of your early death? Plan with the help and advice of an attorney knowledgeable in business continuation strategies.
If you form an entity, for simplicity, a partnership, and one partner dies or becomes too disabled to work, do you have a process by which ownership transfers to the survivor?
Think about that question why? Why are you entering or why did you enter business? The answer usually boils down to a better life for you and your family.
Attorneys advise throughout this process. What type of entity best serves your professional goals and protects your personal assets from business liability?
What preventative measures can be taken to avoid personal liability issues from affecting corporate or business ownership? For example, your partner’s unlicensed son drinks and drives causing a major loss; how can you protect against his business assets transferring to the litigant?
Seek legal advice at any life stage of your business. Growth may indicate a new form of venture. Perhaps a simple partnership needs to incorporate when employees are hired; or, company maturity moves the business into riskier territory. Laws and regulations change with time too; your company may change with compliance issues.
Business success challenges the best leaders and managers. The more detailed and comprehensive the business plan is, organized and conceived when cool heads are not under stress, the easier execution of that plan will be in the worst circumstances. Listen to advisors who have experience in unpredictable scenarios. Your plan will be superior.
In the stewardship phase a company adjusts for the future of succession. Council suggests smoother transition strategies. Throughout, attorneys can prepare for the unfortunate possibility of your company navigating through a probate process or a planned succession of ownership transfer.
Fair and relatively painless succession saves the company money, preserves value for you, your family, and fellow shareholders.
It’s better to have a plan than let fate dictate the outcome.
Let’s go build your business!