Business Succession Planning

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What is Business Succession Planning?

Business succession planning is the process in which long-term needs are identified and addressed. The main concern in succession planning is in providing for the continuation of business operations in the event that the owner or manager retires or suddenly becomes incapacitated or deceased. This can occur by several means, such as transferring leadership to the following generation of family members or by naming a specific person to become the next owner. 

It is highly advantageous to have a business succession plan. Such a plan can create several benefits for the business, including tax breaks and no gaps in business operations. The plan will be formally recorded in a document, which is usually drafted by an attorney. A business succession plan is similar to a contract in that it has binding effect on the parties who sign the document and consent to the plan. Therefore, the main advantage of having a succession plan is that the organization will be much better prepared to handle any unforeseen circumstances in the future.        

What should be included in a Business Succession Plan?

A well thought out succession plan will be both very broad in scope and specific in detailed instruction. It should include many provisions to address other concerns besides the issue of who will take over ownership.

A business succession plan should include:

These are only a few suggestions that demonstrate how complex business succession can be. This is why it is usually necessary to have a lawyer draft the final document for a business succession plan. You should view business succession as an entire process rather than a single isolated event. In fact, it would be ideal to begin creating a business succession plan during the initial phases of business start-up. It is important to have the plan drafted well before retirement approaches.  

What kinds of Legal Issues arise in connection with Business Succession?

As you might expect, there are many legal matters to be addressed when creating a succession plan. Some common issues that arise in connection with business succession include:

Do I Need a Lawyer for Business Succession Planning?

Business succession planning requires much attention to detail as well as a working knowledge of various business and employment laws. For these reasons, business owners usually hire a lawyer to assist them in drafting the plan. Also, in the event of a legal dispute over succession matters, an attorney can help with dispute resolution.   

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Last Modified: 12-19-2013 11:48 AM PST

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