It’s often said that small business is the backbone of our economy. It’s important then to keep companies healthy and operating long after their founders have retired or passed away. Then why have only about 40% of business owners put a business succession plan in place? Ask yourself this question, “Do you have a business succession plan?”
Elements of a business succession plan?
Business succession plans include strategies for continuation of leadership and even ownership roles after an owner or leader has left the company. The details of the plan vary depending on the type of company involved. For example, a family business might groom the younger generation to take over. A large corporation may involve the CEO, board of directors, and shareholders in the planning process.
- Continued management of the company is an issue that may take years to plan. Future leaders may be found within the ranks of the company and trained. In a family owned business, younger generations may start at the bottom rungs and work their way up with an eye toward running the company someday. No matter how it happens, putting good leaders in place is an important part of a business succession plan.
- Sometimes the value of the business comes into play. This is especially true when a business owner or his estate want to cash out or sell their business interest. Owners can simply enter into an agreement about the valuation or can hire an appraisal expert, like a certified public accountant. When a company offers publicly-traded stock, the stock’s market value may be used to determine the value of an owner’s business interest.
- When it comes time to buy out an owner’s interest, companies may not have enough capital on hand. That’s why business owners and leaders typically buy insurance policies that name the company as the beneficiary. When an owner dies, the company uses the insurance payout to buy his or her business interests.
How can I put together a business succession plan?
Analyzing a business and putting legal documents in place is too important to do incorrectly. At the Lambros Law Office, our attorneys use their business law experience to help clients with business questions and concerns. To schedule an appointment, call 401-383-9899. You may also use our convenient Contact Form to let us you know are ready to get started. We assist clients throughout Rhode Island, including Cranston, Providence, and Warwick.