INDUSTRY INSIGHT
BUSINESS SUCCESSION PLANNING
SPONSORED CONTENT
BUSINESS SUCCESSION PLANNING:
DON’T WAIT UNTIL IT’S TOO LATE
F
or small business owners, discussing the topic of “business
succession” can be a tough one. For most owners, their
business becomes part of their personal identity, signifying a
culmination of their life’s work and achievement of a personal
or professional dream.
As is the case with estate planning, delaying business succession
planning can leave a tangled web of confusion for the family and/or
employees of a small business. However, a readjustment in thinking
may help a client to realize the importance of succession planning.
By helping to evolve a business owner’s thought process from “I can’t
imagine giving up my business” to “I have worked hard to build this
business and I want control over what happens next,” it then becomes
easier to discuss and implement a succession plan and secure the
future of the business.
Generally speaking, business succession planning involves
logistical, financial, and legal decisions that will define who will take
over a business in the event of retirement, death, or disability. The
key to this process is to start early and consider the “stakeholders” in
your small business. For example, a CEO of a large corporation is often
pressured by its shareholders to create a succession plan in order to
secure their future investments. As a small business owner, it can be
prudent to follow the lead of a large corporation and make a plan
YOUR SYMBOL OF PROTECTION
Are you worried about losing your home
or life savings to the cost of long term care?
Are you a veteran or spouse of a veteran?
If the answer is yes, we can help.
What's at risk?
Only everything you own
Protecting People, Property, & Life Savings
724-942-6200
PittsburghElderLaw.com
62
724.942.0940 TO ADVERTISE
❘
icmags.com
to ensure that the stakeholders in your small business (whether key
employees or family members) have the same assurances.
When counseling clients on these issues, here are some of the key
considerations we discuss:
1. Consider and evaluate the potential “successor.” Whether
you plan to keep your business within your family or transition
it to a key employee/manager, business owners often assume
that upon their retirement, their chosen successor will be
ready to step into their role. The truth is, unless a plan is
already implemented, this assumption can be extremely
detrimental. To avoid this issue, we discuss choosing a
successor for the business and making a plan for their role in
the future. Any successor will likely need to learn the business
operations over a period of time and their role can be defined
in a well-drafted plan.
2. Relinquishing ownership does not always mean
relinquishing control and income. Many of our
business succession plans for clients involve a graduated
relinquishment of ownership with the potential of retaining
some control and income from the business. Many see
succession planning as an “all or nothing” proposition where
the only option is for the entirety of ownership, control,
and income to be relinquished all at once. Once a successor
has been chosen, a specific succession plan can define this
transition step-by-step. This helps to set expectations for roles,
increases transparency in the process, and provides a road
map for the future of the business.
3. Valuation of the business. A business succession plan often
involves a valuation of the business. This is a key consideration,
especially for a business owner hoping to transition his or her
business. The business owner will want a valuation of their
business that is representative of its true value now, instead of
waiting until a valuation is needed in the event of a transition
upon a disability or injury.
4. Discussion of goals. Especially in small businesses with
multiple partners, a guided discussion will help to ensure that
each partner’s individual goals are understood and will also
prompt individual owners to define and communicate their
own goals, along with those of the business. This will allow for
smooth succession planning and provide a clear plan for the
future of the business.
Just as it is important to create a plan upon forming a business,
seeking proper guidance to create a business succession plan is
integral to ensuring that a small business survives and thrives upon
the exit of its owners.
Jennifer Bittel is an associate attorney with the elder law
firm of Zacharia Brown P.C.
Zacharia Brown assists individuals and their families
with Medicaid eligibility, VA and estate planning, estate
administration, business counseling and real estate.
Pittsburgh-area office locations include McMurray,
McKeesport and Wexford.
Phone: 412.751.5670.
Website: www.pittsburghelderlaw.com.
E-mail: [email protected]