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Succession Planning for Businesses

Posted by Gregory Poulos | Apr 26, 2016 | 0 Comments

For business owners, figuring out how to pass a business on to heirs can be a tricky business. We've all heard stories about business owners who failed to plan and the family ends up embroiled in endless court battles for control of the company.

Let's look at a hypothetical situation to see some problems that might occur. You own XYZ Widget Company. Your heirs are your wife and three children. The first question you must ask is if your family is capable of taking over the business (and running it) when you leave.
• If you have no heir who is competent to take over running your business, then how to you arrange your estate so your family still receives proceeds from the business, but a competent manager actually runs everything?
• If you have a family member capable of running the business (let's say your son), how do set up your estate so your wife and daughters still receive a fair share, but perhaps not as much as your son, who will do the actual work.
• It can become even more complicated. In your opinion, your son has the ability to run your business, but your daughters don't, although they believe they do. They'll contest the Will or Estate for control of the business.
• In addition, how do your protect and reward valuable employees in the business when someone else is running things.
• What happens if you have a partner or several partners in the business? Should your partners buy out your shares in the company and the proceeds go to the family? Should your child become a partner?
• Should your ownership in the company transfer to a legal entity like a trust?
• What happens to your business if you retire, die, become disabled or incapacitated? What happens if the business goes into bankruptcy or loses its professional license?

Business Succession Steps:
• Find and hire a good business attorney to help with all the legal and paperwork necessary. It is particularly handy if you can find a skilled attorney who can handle both business law and estate planning. Incidentally, at Poulos Law Firm we can handle both aspects.
• Engage your financial advisors and CPA's in the process.
• Ask yourself lots of hard questions about what you want to see happen to your business, who should inherit, how you want it run, etc.
• Consult with any partners or valuable employees and get their take on what should happen.
• Ask your attorney and CPA about all the relevant laws and tax consequences as you plan.
• Have a valuation completed on your business and the resources.
• Engage a business broker early in the process to help you make changes that will make the business be worth more in a sale.
• Figure out how to transfer to tangible and intangible assets and create a succession plan.

About the Author

Gregory Poulos

Meet Greg PoulosAn Experienced Estate Planning & Business Attorney serving the Phoenix AreaGregory Poulos counsels clients on the best strategies for accomplishing their estate planning and business goals. Greg starts by “Putting His Clients at Legal Ease” so that they understand the legal issues...


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