How Do I Write a Business Succession Plan?

If you own a business, an important part of estate planning is to write a business succession plan. Your business succession plan ensures that the business you worked hard to build is preserved for future generations or is liquidated to maximize profits for your family members. A Massachusetts business succession planning attorney can help you write a plan that addresses all required matters and makes it easier for your family after your incapacitation or death. 

Creating a Comprehensive Business Succession Plan

The first step in writing a business succession plan is to review the governing documents for your company. The type of company and the governing documents for your company may heavily impact your business succession plan. For example, if your company is organized as an LLC, the operating agreement should address how interest in the company is transferred upon the death of a member. If your business is a partnership, the partnership agreement should address the issue. Therefore, you need to consider how the business documents impact the transfer of your interest upon your death or retirement. 

Once you determine how to transfer interest in the business to another owner, you need to develop the business succession plan to ensure that a new owner has the information and resources the new owner needs to continue operating the business successfully.

Key matters to consider and include when developing a business succession plan include:

  • Who will be the successor? Do not assume that family members have the skills or the desire to continue operating a business.
  • A timeframe for transferring the business. The timeline becomes important when you consider handing over daily operations for the business when you retire.
  • Do you want to begin with a partial succession or transfer the entire business interest? Some business owners prefer to ease their successors into business operations.
  • What is your plan for incapacitation? Who can take over the business immediately? Do you want key professionals in place to assist the person who takes over in the event of incapacitation?
  • Do you need to make considerations for key personnel changes or plans to retain key employees?
  • What legal considerations do you need to make? Do you need to prepare a buy-sell agreement, update your estate documents, or transfer the company to a trust?
  • A developed communication strategy that encourages new owners to utilize the resources you have in place that can help them as they learn the business.
  • What financial considerations are required, such as tax implications, retirement income, sales price, etc.?
  • Are there issues with risk management? Do you need additional insurance, or does the new owner need education and instruction in specific laws and industry regulations?

A business succession plan may also address liquidation or sale to a third party. When liquidating or selling to a third party, many of the same elements apply, such as obtaining a correct business valuation, retaining key employees, and considering tax and other financial implications.

Contact a Massachusetts Estate-Planning Attorney for Help

Developing a business concession plan can seem overwhelming. However, if you approach the task one step at a time, the process becomes much more manageable. A Massachusetts estate planning attorney can help you identify your goals, address concerns, and develop a plan that incorporates your estate planning goals and desires. Contact our office today to learn more.