You may have heard that you should do business succession planning, but what does that mean?
In a nutshell, business succession planning is basically setting up plans to make sure that your business can continue if something should happen to you or another one of the owners. For instance, if you're the sole owner what would happen if you become incapacitated or want to retire? If you have more than one owner and you just want out or you want to sell your interest? That's what business succession planning deals with.
I like to think of there being two major components to business succession planning: the operational component and the ownership component. Many businesses are probably already doing the operational component, but maybe not in a very intentional way. If you've got procedures setting forth how certain things such as account access are done, that's the operational part of business succession planning. The same goes for cross-training employees, having the key person to take on your roles and responsibilities should you decide to leave the business for any reason.
On the other side is the ownership part, which is a little more complicated. Whether you're an LLC or Corporation, you should have an operating agreement or a shareholder agreement in place to set forth the rights and obligations between the owners of the business. That document can, and frankly, should also set forth what happens if one of the owners becomes incapacitated, goes into bankruptcy, goes through a divorce, wants to sell their interest, or will be exiting the company for any reason. Accounting for this future ownership will ensure that your business can make it through these circumstances.
All of this is very daunting, but you owe it to yourself and your business that you've worked so long and hard for to make sure you protect that legacy that you are creating.
KATHERINE L. TAYLOR, ATTORNEY AND CPA
5850 Waterloo Rd