Whether you are selling your business, transferring ownership or seeking retirement, it is vital to employ the help of a qualified business attorney. An attorney can be incredibly helpful during the early phase ofbusiness succession planning so that your desires, plans, and goals for the future are clearly outlined and understood. Business owners are often emotionally invested in their companies and should not represent themselves in the sale of their businesses. The business succession planning process is inescapably complex, and the personal, legal and tax implications of the various options must be considered before a business succession plan can be outlined
. The first step by any business attorney should be a candid discussion of what the client really wants. Emotions and family dynamics are formidable forces in many small businesses, and should be taken into account when doing small business succession planning. A carefully designed process and timeline can help everyone involved understand the process and measure the progress of the plan. There are several steps that will make the transition smoother. Identify your goals. Determine your goals for future income, investments, and retirement planning. It is also important to discuss your level of involvement, personal values and what kind of legacy you want to leave behind. These factors all combine to create a set of personal goals, and ultimately set the standard for what to expect from your business succession plan. Identify the needs and goals of stakeholders in the company. Take into consideration the needs and expectations of family members, other owners, and key employees. Gather information from everyone who will be affected by the business succession plan. Involving these individuals in the process will help to reduce the negative impact and volatility caused by the transformation of your business. Explore all options. Fully explore all options available to you. Determine which goals of your business succession plan meet what is legal and financially possible. Failing to explore multiple options often means that after the plan has been designed a different, more efficient solution emerges. This can lead to costly changes that may slow down the process of the plan. Design and implement the business succession plan. The lawyers who design the plan can also help devise a process to implement it. A timeline for implementation should include specific signposts for successors. In order for the time line to be effective, the business owner should also inform other stakeholders. Shared information is the best way to insure implementation, avoid harmful rumors and prevent conflict. Potential Options Many family business owners want the business to stay in the family. A solid succession plan can allow you to pass the business on to family members while minimizing tax liability. A variety of strategies can be used to pass on the business, including: Gifting shares of stock Selling to a family member Gifting to a Trust Grantor Retained Annuity Trusts (GRAT) Supplemental Executive Retirement Plans (SERP) Family Limited Partnerships Selling or gifting rapidly appreciating assets Trusts Charitable Remainder Trust Management buyouts will keep the company closely held and will prospectively continue the business in a way that the owner will find appealing. Management buyouts can be combined with Employee Stock Ownership Plans (ESOPs) to reduce financing costs. A management buyout is usually a combination of a few different strategies. Another option that is useful in smaller businesses is an employee-owned cooperative. Both provide the same tax break to the seller; often,capital gains taxes can be deferred. While the task of creating a business succession plan may seem daunting, ultimately it is worth the time and effort. A smooth transition will reduce stress as you enter the next phase of your life, allowing you to fully enjoy the fruits of your labor. Carosella & Associates, your team of lawyers in Montgomery County, PA can hold your hand and guide you through this complicated and sensitive process.
0 Comments
A knowledgeable attorney is critical to business succession planning, if only because you will probably only go through the process once, while the experienced attorney may have already handled dozens of such cases. A good attorney can help separate the emotional issues and practical considerations, guide you and stakeholders through the many steps, and preserve vital records for future use. Business succession planning also involves legal paperwork that, in most cases, only a business attorney is qualified to handle. Multiple Strands When talking about business succession planning, the business owner needs to realize the difference between the ideal and the emergency, between the perfectly timed succession and the unexpected succession borne of disaster. These multiple strands must be kept untangled, too, and here an attorney is key to the process. Consider the various ways a business might change ownership:
Wise Counsel An attorney working with you on business succession planning will listen, carefully, to your ideal transition. Hearing your desires about the business you created, your attorney can suggest ways to protect those dreams and preserve the business. Suppose you want to sell your business and enjoy the profits of your many years of labor and sacrifice. An attorney who understands and appreciates your entire plan can draw up the necessary transfer papers, resolutions and detailed notes regarding the succession. Answers without questions working long hours with little or no vacation has probably left you little time to consider all the aspects of business succession planning. Some questions may never have occurred to you, but a good business attorney knows not only the right questions, but their answers as well:
Family Ties One of the most joyous aspects of detailed business succession planning is determining the distribution to family members. Handing a business over to future generations not only preserves the great work you did in creating the business, it strengthens the family bonds that support the venture. Tied into that plan is estate planning, protecting your rights as the seller, and preserving liquidity for yourself in retirement. With all these issues, an attorney’s advice is not only helpful, but fundamental. To-Do A simple checklist of business succession planning can help you begin the conversation. This is intended only as a discussion starter, not a finished agenda:
Carosella & Associates located in West Chester, PA have vast experience with business succession planning. Contact our offices today for a consultation so that we can help you plan for the future of your business. |
AuthorWrite something about yourself. No need to be fancy, just an overview. Archives
May 2023
Categories
All
|