In January, we set goals for ourselves in the hopes that this year will be a little bit better than the last. Our resolutions can be small and concrete, like cutting down on caffeine, or big and transformative, like changing our outlook on things outside of our control. Whatever the resolution, the new year offers us a clean slate and a chance to make a difference in our own lives.
In our businesses, the new year should offer the same opportunities. But, how many entrepreneurs set new year’s resolutions for their companies? Of course, we create spreadsheets and documents about our financial goals, but what are you going to do this year to make a real change in your business?
Make Your Business Resolution Count
At Brian M. Douglas & Associates, we work with some very successful entrepreneurs on a daily basis. However, we consistently see an area of business ownership that is overlooked: succession planning. Succession planning, for those of you who don’t know, is the process of preparing your business for the day when you or your business partners are no longer willing or able to work. It happens in the life of every business, and yet so few business owners take the time to make a plan. This new year, we want to highlight this woefully underappreciated business practice and offer it to you as a suggested business resolution.
Why Do You Need a Succession Plan?
Every business owner, founder, and entrepreneur reaches a day when he or she is either unable or unwilling to continue running their business. This may be because a new opportunity arises, or they want to retire, or they become ill. Whatever the reason, each business owner will eventually need to step away from their work. In some circumstances, like retirement or selling the business, a plan will develop slowly, as the business owner makes decisions. However, there are some circumstances that do not allow for this kind of real-time planning. If you become ill, incapacitated, or die, what will happen to your business? This is where a succession plan comes in.
Getting Started with a Succession Plan
Creating a succession plan is the best way to protect your family, your business, and your employees in case you become incapacitated or pass away unexpectedly. When creating your succession plan, you will first look at the structure of your business and answer some tough questions:
- Do you want your business to pass to your heirs, be sold, or dissolved when you are no longer able to run it?
- If you have business partners, will they buy out your share of the business or do you want someone in your family to take your place?
- Is your business dependent on your skills and expertise, so there is no one to take over the business? If so, what would you need to do to wind down the business gracefully? Settle all debts? Pay fair severance to employees?
- If you want your business to pass to an heir or fellow business owner, do they have the information and knowledge required to take your place?
The answers to these questions will help you start to form the outline of your succession plan. Once you know who you would like to oversee your business’s succession, you can create instructions that guide the transition as smoothly as possible. Your business is your life’s work, doesn’t it make sense to create a plan to protect it?
Create a Succession Plan that Works
For a succession plan to work, it should be written down and fully detailed. An experienced estate planning and business attorney can help you make sure that the plan includes all necessary instructions. Depending on your goals for your business, it may include elements such as buy-sell agreements, that give co-owners the opportunity to outline a fair transfer of ownership shares. It may also include life insurance, not just for your family’s benefit, but to support a buy-sell agreement or to give your successor some time to oversee the transition or dissolution of your business.
All too often, the unexpected death or incapacity of a business’s owner or founder leads to a rapid decline and eventual bankruptcy of a business. A plan can prevent this fate.
Naming a Power of Attorney and Successor
Regardless of whether you want your business to wind down or to continue thriving after you leave the helm, it will be essential that you provide all necessary information for an executor or successor to take control during the transition. That means that your succession plan should include all account names and passwords for all bank accounts, email accounts, social networking sites, and file storage sites.
It will also be essential that you have Durable Power of Attorney documents in place before the unexpected occurs. If you become incapacitated, even temporarily, it is important to have an individual empowered to carry on business affairs such as payroll.
Keep Your Resolution by Working with an Experienced Estate Planning and Business Attorney
When planning for your business’s future, there will be a lot to consider. Don’t let this resolution be one that fades away by February. Consult with the experienced business and estate planning attorneys at Brian M. Douglas & Associates to determine which is the best plan for you and your family. Call our office at (770) 933-9009 to schedule an appointment, and let’s start the new year off right.