Through the years, you have transformed your company from a startup to a solid success. You know the time to retire will soon arrive, so it is time to review your business succession plan. What? You don’t have one? There is still time.
Not only does a succession plan determine who will succeed you as leader, or how you would like the business to be sold or distributed to heirs — a succession plan can also help ensure continuity of operations during a planned transition to new ownership or management. A succession plan can help keep in place your desires for the future of the business, as well as address any unexpected situations such as a medical crisis that could render you incapacitated and unable to run the business.
Family members taking over
With a solid succession plan, you want to achieve many goals. A big one is to ensure a smooth transition that also protects you and your family from any potential litigation.
One option that many small businesses owners tend toward is allowing a family member or longtime, trusted employee to succeed as the owner. You hope to find the person who will be the right fit. That could be someone who will remain as devoted to the business as you are, bring additional ideas for growth, and has the qualities of a good leader.
If you choose to hand down the business to family members, let them know of your intentions regarding the future of the company, as well as their prospective roles. You want to ensure the protection of your company as well as avoid any disputes among family members.
Selling the company
Another option for business succession is to sell the company. Whether selling the business outright or selling shares or a stake in the company, a business owner must carefully examine each proposition from potential acquiring parties.
Selling the company allows you to retire, knowing that your business carries on with new owners. If you maintain a stake in the company, you can still play a role in business decisions and direction, but the bulk of the responsibility lies with the majority owner.
Leaving your company in good hands
Your goal may be to see your business continue or to cash out and enjoy the profits of your hard work. In either case, an effective succession plan is essential. You can create the plan — ideally you would do this as early as possible in the life of the business — and make updates to the plan as the business changes or your needs change.
For more on these matters, please see our overview of Business and Commercial Law, as well as our overview of Estate Planning and Probate.