Several important documents are needed when setting up a business succession plan. Common forms may include a company valuation, a statement identifying potential successors, a transition policy, legal and financial strategies, and a crisis management plan. These blueprints help ensure a smooth transition if the current owner leaves the business, either because of retirement, disability, death — or simply the desire to move on. Learn more about these important plans and documents when setting up a business succession below.
An accurate assessment of your company’s current market value is an important step in developing a business succession plan. Even if you do not plan to hand over the reins anytime soon, knowing your company’s potential sale price has benefits. You could use this figure to develop your retirement strategy, attract new investors, or ensure the company is adequately insured.
The next step in most business succession plans is to identify key players and leadership candidates. Once you leave the company, someone will need to take over your responsibilities. Some owners choose a family member, but you may need to look outside of your relatives for talent with the skills and expertise necessary to fill your role. By creating a plan ahead of time, you can address potential conflicts and ensure a fair transition for everyone.
If you have a solid exit date, develop a transition policy that defines your desired timing. If you want to retire within 10 years, state so in your plan. Knowing when and how you want to shift ownership responsibilities to your successor will help manage employee concerns and maintain stability as the date approaches. A knowledgeable attorney can help you periodically assess the transition plan and adapt it as your business grows and personnel evolves.
Do not forget to address legal and financial strategies in your succession plan. Knowing how to handle important details like contracts, intellectual property, and estate planning will smooth the process for future leaders. Additionally, plan to analyze the financial implications a change in ownership may cause, such as estate taxes. You may also want to consider transferring the business’s assets to a trust that benefits family members.
Including steps for crisis management is also important to creating a business succession plan. Layout procedures that address unexpected disruptions, like a cyberattack or other emergency, such as a natural disaster. It should cover scenarios that may impact the company’s operations, including a sudden departure of key personnel. Veliz & Associates, P.A. recommends putting together a crisis response team that will carry out these contingency plans and manage resource allocation strategies in the case of an emergency.
Whether retirement is just over the horizon or not, your business needs a succession plan. Our experienced legal team could help you prepare your strategies and review these documents annually to help ensure a successful and seamless transition. Contact Veliz & Associates, P.A. today to learn more.
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