What will happen to your family-owned business if you suddenly fall ill or pass away? Have you created a concrete plan to ensure it continues when you are no longer around to run it? This is a question that too many small-business owners never ask, and consequently, their companies fall apart when tragedy strikes.
If you want to protect your business and the loved ones who rely on it, you need to proactively create a succession plan — preferably long before you need it. By taking the key steps in business succession planning, like identifying successors and arranging for an orderly transfer of ownership, you can prepare for a smooth generational handoff. Don’t wait until it is too late. Contact The Weisblatt Law Firm, PLLC, to discuss succession planning today.
Key Steps in Business Succession Planning
When you’re planning for business succession, start with the following key steps.
Assess Your Current Situation
Anyone who attempts to run the business after you are gone will rely on the building blocks you created. Before planning for that future, you need to understand the current state of your business and document it for your successors. Review your business structure, its financial health, and key personnel, identifying potential successors. Keep day-to-day operating documents organized, and arrange for regular reassessments as things change.
Define Your Goals and Objectives
You can’t plan for every possible future. Instead, you need to determine a few concrete goals. For example, you might decide that you want your family to retain ownership of the business. Discuss this goal with your family until you create a common vision for the future. Along with planning for unforeseen events, you should also outline a timeline for a natural transition, assuming nothing happens to you that will force it to proceed more quickly.
Develop the Succession Plan
Finally, create a formal plan that establishes how the legal transition will occur. Work with an experienced business law attorney throughout this process to ensure you don’t miss anything or make any legal mistakes. You may also want to create contracts that ensure the transition process survives you.
Legal Considerations for Business Succession Planning
One of the more common mistakes that business owners make when forming succession plans is assuming that the business structure that they currently use will continue to be the right choice in the future. However, this often isn’t true.
For example, suppose that you own and run a business with your siblings, but only one of your children wishes to take over after you and your siblings give up the reins. When the time comes, switching from a partnership to a solo proprietorship isn’t too hard, as long as you prepare for the change and let your lawyers handle the paperwork. Any plan should set up arrangements that are optimal for the future growth of the business.
Once you know who you will transfer the business to and what structure you expect it will use, begin the plan for ownership transfer as soon as possible. This doesn’t mean you need to complete the process; it just means you should create the contracts, set up mechanisms for transfer that limit tax burdens, and start to train your successors. It isn’t good for anyone if you transfer ownership of your business to someone who has no idea how to file business documents or what forms they need to fill out.
Are you thinking about transferring your business to the next generation? Contact The Weisblatt Law Firm, PLLC, at (713) 666-1981 to discuss succession planning.
Common Challenges and Pitfalls
When planning for the future, beware of the following common challenges or pitfalls.
Family Dynamics
Just because your heirs are related does not mean they get along. At some point, you may need to put aside emotions in order to make the right choices. When determining who is best to run your business, be fair and make judgments based on the same standards you would use to promote a nonrelative.
Financial Considerations
When business finances are tied up in family finances, as is often the case with family businesses, it can be difficult to accurately value the company. That’s why it’s best to seek an unbiased expert to determine your company’s market value. Furthermore, research all taxes and costs involved in any transfer of ownership. These might be quite a bit higher than you expected.
It is easy to underestimate the costs or taxes involved in transferring ownership of a business if you don’t do proper research.
Lack of Preparation
A plan is only as good as the preparation put into it. By putting off the succession plan, you create a potential for conflicts that will disrupt your legacy. Furthermore, you should regularly review and update any plan after significant changes in your life, family, and business operations.
Why Choose The Weisblatt Law Firm, PLLC, for Succession Planning?
The attorneys at The Weisblatt Law Firm, PLLC, have decades of experience handling business law in Houston. We have helped hundreds of small-business owners arrange succession plans that protect their loved ones and their legacies.
The Weisblatt Law Firm, PLLC, is a family-owned business. This personal experience gives us a stronger connection to business owners who are planning for the future. Our legal team draws on this background and our knowledge of Texas business law to help you and your successors prepare for the way forward. If you want to know more, contact our law firm to discuss your plans with an experienced succession planning attorney.
Houston Business Lawyers Here to Serve You
Don’t let your family-owned business fall apart when you retire or when the unforeseen happens. Start planning for the future of your company and an eventual transfer of ownership today.
Are you ready to take the next step in transferring ownership to the next generation? Call The Weisblatt Law Firm, PLLC, at (713) 666-1981 to schedule a consultation with experienced business law lawyers in Houston.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
