Business Succession Planning
Hope for the best but plan for the worst…
When starting a new business, most people don’t put much thought into what will happen if they become incapacitated, die, or otherwise become unable to run the business.
When you are gone, does the family business end? Or, can you arrange for the business to continue and thrive?
Your SC business and estate planning lawyer at Axelrod and Associates will help you to set up your business structure not only to meet the business’s current needs but also to ensure that the business survives and continues to be an asset to your family.
What Happens if I Don’t Have a Business Succession Plan?
If you don’t have a business succession plan in place, your shares in the company will either pass to relatives or other shareholders upon your death. Problems that may arise include:
- Conflict between your relatives as to who should receive shares in the company and who is in control;
- Conflict between relatives and other shareholders in the company;
- Loss of employees and customers due to uncertainty and instability in the business’s operations;
- Unqualified individuals gaining control of the business; and
- Lawsuits between relatives, shareholders, and others.
As with estate plans, one goal of an effective business succession plan is to avoid litigation whenever possible…
What is a Business Succession Plan in SC?
Although the best time to put a business succession plan into place is when you first set up the company, we can also help to restructure your existing business to ensure that it continues after your passing and continues to support your family members.
An effective business succession plan may include a combination of:
- Selecting the right type of business entity;
- Drafting by-laws or operating agreements that spell out what will happen upon your death or incapacity;
- Use of estate planning documents like your will or trusts to transfer assets or shares while minimizing tax liability;
- Purchase of life insurance plans; and
- Specifying a method to determine the value of the business in the event of your death.
Your business succession plan should be tailored to accomplish your goals which may include:
- Keeping the business within the family;
- Deciding which family members or others take control of assets;
- Deciding which family members or others take or remain in management positions;
- Minimizing estate taxes;
- Specifying who can “buyout” a deceased member’s shares under what conditions; and
- Ensuring that there is sufficient cash or insurance on hand to buyout the deceased member’s shares and to pay taxes.
Arrangements can be made to instead sell the company or divide the business assets among the employees or family members. Your attorney can also set up trusts to facilitate the transfer of assets to family members while minimizing tax liability.
Whether you are starting a new business or need help incorporating your business succession into a comprehensive estate plan, call your estate planning and business law attorney at Axelrod and Associates today at 843-353-3449 or complete our contact form to set up an initial consultation.