Owners who are the lifeline of their companies tend to possess all the knowledge and connections their businesses need to thrive. But too often, their businesses fall apart when they retire, die, or become incapacitated.
One of the best ways to avoid this problem is by forming a succession plan for your business. In this article, we’ll guide you through some of the essentials of robust succession plans, and we’ll help you find an attorney who can set your plans in motion.
Important note: This article should not be construed as legal advice. It’s imperative that you speak with an attorney who can help you navigate your succession and prepare legal documents that suit your specific circumstances and goals.
What is a business succession plan?
A business succession plan is a roadmap that explains what should happen if you’re unable to operate your business because of death, disability, incapacity, or retirement. Key elements of this plan often include:
- Emergency plan procedures for essential operating tasks
- The naming of successors who will manage your business after a specific triggering event, such as death or incapacity, or an advisement to liquidate and sell the business
- Instructions on how your personal retirement plan should be distributed
- A description of how your estate should be managed
- Additional elements that address the specific needs of your business
Should I create a plan if my intent is to close the business?
Yes. Your succession plan will help your executor, estate’s trustee, or others work through the critical steps of closing your business. With a liquidation plan in place, you can provide peace of mind to your beneficiaries that your business will be formally and correctly liquidated and that the proceeds will be distributed in the manner you intended.
How do I name a successor?
Naming a successor can be immensely challenging. Try this: Think about who you’d want to run your business after your death, disability, or retirement. Many owners choose their spouse or children, but you might also consider a key employee who has the knowledge and skillsets required to run the business.
Next, have a conversation with the person or people you’ve selected. Ask if they’ll be willing to step into that role, and if they are, be sure to develop a procedure guide, a key employee retention plan, and training materials that will help them navigate every essential part of your business.
Once you’ve identified a willing successor, you can work with your attorney to ensure that the rights to own and run the business are passed to that person or group of people. An attorney is essential for this task because the process of transferring your interest to a named successor depends on how your business is structure. Your attorney can help you follow the appropriate legal procedures.
Pro tip: Be sure that your attorney helps you specify what should happen with your company if the successor leaves the business or declines to take ownership of it. You may define procedures for liquidating the business or naming an alternate successor.
What should I include in my business’s emergency plan?
If you were to die suddenly or become incapacitated, your family, partner(s), and/or employees would need a clear emergency plan for your business. Your emergency plan should include all the procedures that are necessary for running the business in the short term, and it should provide contact information for key personnel, including your successor, accountant, attorney, and other professionals who can help with the business and other essential matters.
Can I create a succession plan on my own?
Some business owners have success with online templates, but often, these templates fail to address the complex issues involved in estate planning. An attorney can help you work through the planning that’s necessary for small business owners to help your business to thrive through any future transition.
How can I connect with an attorney who can help me with my plan?
We can help you find an attorney who is experienced in small business issues. Click the Connect button to get started:
What other steps can I take to secure the future of my business?
Because you are vital to your business, you may want to consider purchasing one or more insurance policies to help the company and your family if you become disabled or incapacitated. Insurance policies you might want to consider include:
- Business overhead insurance
- Business interruption insurance
- Short-term disability insurance
- Long-term disability insurance
- Business income insurance
- Data breach insurance
- Buy-out insurance
You might also want to review your coverage and policy limits for your business insurance policies, paying special attention to your property damage, general liability, workers’ compensation, and commercial auto coverages.
It’s a great practice to review your insurance policies on a regular basis. By doing so, you can ensure your company is protected against any catastrophe.
Would you like to connect with a commercial insurance agent? Click the Connect button to get started:
Insurance is one expense where it makes sense to obtain multiple quotes. After clicking the Connect button above, you may also want to explore popular insurance products through these providers:
- Coverwallet. Coverwallet (an Aon company) offers a wide range of insurance products that may cover all your business’s needs. Visit their site to take a free insurance assessment and obtain free quotes from their best-in-class insurance partners.
- Hiscox. Hiscox provides fast, affordable coverage for many small businesses. With customized solutions for more than 180 professions, you’re likely to find the right set of options that suit the needs of your business. Follow this link to get started on your free quote.
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