January 5, 2018
Ring in the New Year with a Succession Plan
by Stephen E. Chappelear, Frost Brown Todd LLC
The start of the new year is an excellent time for smart business planning. And smart business planning includes thinking about the unthinkable. While we don’t like to think about some unpleasant facts, none of us will escape the inevitability of death.
Doesn’t it make all the sense in the world to have a plan in place for something that you know will absolutely, positively happen, and that could have a devastating effect on your business?
What happens to your customers if you are gone tomorrow? To your employees? To control of the business? Will your business fold? All too often, that is exactly what happens. It isn’t just death that can have that effect, either. A couple of other “D’s” include disability and disappearance.
To protect your business, prudence requires a contingency plan if something tragic happens to the key decision maker and driver of the business.
One of the most important steps is to identify your successor. This should be someone with the right leadership skills, who understands the business and is trustworthy. Of course, this designation can change over time, but delay doesn’t help the process. Identify now who you would want in this position tomorrow. Thinking that your successor might be a different person 10 or 20 years from now doesn’t mean you can wait until then to get your plan established.
Identifying your successor then leads to the necessary legal papers to formalize that decision. If the designated successor isn’t already trained and ready to step in, that process needs to get underway. The next person up needs to know and understand what their role will be.
Transferring power following death of a business founder too frequently leads to disputes and lawsuits. Avoid that by making it perfectly clear who should be taking control.
Transferring ownership interest in a company should also be part of an overall estate plan. For example, one family member might be given controlling interest in the family business. Another might be better suited, and happier, with receiving other property. Tax considerations may also come into play.
The goal should be to allow the business to continue to grow and flourish, furthering the founder’s dream and vision, with minimal disruption and delay, which is fair to your customers, employees and business.
If you need assistance setting up a contingency plan for your business, contact a lawyer or business consultant. Best wishes for a happy and prosperous new year, made better with sound planning!