Business succession is an important topic in the best of times, but in the era of the novel coronavirus or COVID-19, when the future is uncertain, business succession becomes an even more important topic.
Why should you have a business succession plan in the event key leaders or officers are suddenly unavailable? A business succession plan ensures that the business owner, or their estate, will get an established value for his/her business interest, that an orderly transfer can take place, a timely settlement of a owners’ estate, and so that the entity that the owner has spent a good deal of his/her life building, can continue to thrive.
A business succession plan is often paired with a Continuity of Operations plan to ensure that institutional knowledge is strategically spread through the organization through proper planning, risk management, and resource allocation, to ensure operations can be maintained after the loss of a key executive.
Business succession comes in many forms. Some examples would be the sale of the business, or if there are partners, a buy-sell agreement among the partners. In professional services businesses, a common form of succession is a vesting into ownership of key employees and a subsequent buyout of the owner.
While there are an infinite number of ways to structure the succession, certain documents would be required in almost all cases. The documents and information required would include:
- Bylaws or operating agreement
- An accurate assessment of what the business is worth.
- Business plan and table of organization
Depending on the succession strategy, the business may need:
- Buy/Sell agreements
- Employee vesting agreements
- Insurance policies
- Meeting minutes
- Non-disclosure agreements
- Employment agreements
The bottom line: business succession planning requires careful preparation. Business owners seeking a smooth and equitable transition of their interest should look to a competent, experienced advisor for assistance. Contact us at firstname.lastname@example.org.