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The Role of an Attorney in Business Succession Planning

If you’ve spent your life’s work building up a business, it can be hard to think about how the business could ever continue on without you. But the fact is that if you want the business to thrive even after your gone, in the way you think it should, you really need to take some time to for business succession planning.

Since business succession planning can involve both legal issues and emotional issues, an attorney who specializes in business succession planning can really help you make sure that your business is legally sound for the future and can provide third-party counseling about decisions that can be emotionally draining.

There are two important issues that a business attorney can help you with: setting up ownership and managing the impact of estate taxes.

1. Ownership: To determine how your company will be owned, you need to first decide who will manage the company. If you are unattached to the company or want a clean split, you may consider transferring management and selling the company to an outside source. Or, you may want to search for an outside individual who seems to have good managerial and business skills. If you have children who work with you or long-term employees, you may want to leave leadership and ownership to them. If you have multiple children, some of whom work in your business and some who do not, you may want to consider dividing your company into voting and nonvoting stock.

Stock options are also a good way to invest in and retain long-term employees who can assist the transition when your business experiences a change of leadership. Choosing a future management team for your business and trying to divide the worth of your business can feel overwhelming. An attorney can help you weigh your options and devise an ownership transfer to suit your needs and desires.

2. Taxes: If not carefully planned for, taxes that can arise when a business transfers hands can serve a hard and sometimes lethal blow to a business’s finances. Even if you are planning on leaving your business directly to your spouse, you still need to talk to an attorney with business succession planning. Estate taxes can still affect you if your business is worth more than a certain amount and you don’t take additional steps to lessen your tax burden.

If you are leaving your business to a child or long-term employee and you start early enough, you can gradually transfer your assets to them to avoid some of the tax strain. If you are a partner in a business, the partners may want to consider taking out life insurance policies on one another. That way the partners will be able to buy out your investment in the company upon your death and compensate your family. There are so many different taxes that can affect a business transfer and so many different succession scenarios that you really need to seek the advice of a business succession planning attorney for sound advice for your business.

When you spend your life investing in and growing a business, it can be hard to think about having to let go of your life’s work to someone else. But if you want to protect the business as best as you can, you need to plan in advance. A business succession planning attorney can make sure that you plan well.