Business succession planning is a practice or set of estate planning practices used by business owners to ensure that a“family” business can run successfully in the event of their death or should he/she become incapacitated and unable to manage or operate the business. I receive a lot of inquiries on this topic. People want to know if they need a business succession plan or if they are somehow covered by wills and living trusts. I usually walk people through a basic set of questions that go something like:
- If you die or become incapacitated, can your family/lover/partner run your business successfully without your guidance and support?
- Would your loved ones be able to hire an appropriate person to run the business without your assistance?
- Are there partners involved in this business? I’m going to come back to this one in Part II
- Do you want this business to “stay in the family” or would you want it to be sold to support your family?
While I ask these questions and more, I have to be honest and say that I already know what the answer should be. Yes, you need a Business Succession Plan because as “they” say: an ounce of prevention is worth a pound of cure. Even if you believe your family is well-equipped to handle things if/when you are gone, you really don’t (and won’t) know until that time comes. Having a well-thought out Business Succession Plan at least eliminates a great many of the questions that your family would have to ask someone (at a high hourly rate) should something happen to you.
For a unique family (or non-traditional) this becomes even more important because, at times, there is not always a support system in place that your partner can fall back on nor legal safeguards the likes of which are available to traditional families. In short, if something happens to your partner you are swimming upstream unless the two of you have created an air-tight business succession plan. The business won’t just naturally fall to your partner unless you’ve created the appropriate legal documents that name him or her as the owner/operator in the even of your death or injury.
Just recently one of my clients became incapacitated and the Business Succession Plan he and I created “kicked in”. His partner is now able to operate the business and keep it running until he is back on his feet again because we successfully planned for it. Had we not prepared so thoroughly it is possible that the salon would have closed within a month. Think about it, who would pay the utilities? The rent? Salar