Succession Planning for Small Businesses

The vast majority of businesses that exist in the United States today are owned or controlled by family members. In many cases, long-established businesses will be passed down from one generation to the next, which highlights the need for a clear business succession plan. The reality is, however, that when business owners transfer their interests to another, about two-thirds of these transferred businesses will fail. Creating a clear and comprehensive business succession plan is often essential to the longevity of a business.

In most cases, the transfer of a family business occurs because its founder dies, becomes incapacitated, or simply retires. When a business owner contemplates a transfer, there are a number of different issues that arise, which can result in being forced to make some difficult decisions. You will need to plan for many different contingencies, some of which you may have never considered. For example, you need to designate the person or persons who will actually operate the business following your death, in addition to who will own the business. If you potentially leave behind a spouse, you will need to determine what that spouse’s role in the business will be, if any, and whether he or she will receive income from the business. As your children grow up and marry, you also may need to take measures to protect your children’s business assets from their spouses, if this is a concern.

Furthermore, you will need to create your business succession plan in tandem with your estate plan. Businesses are likely to owe debts and own tangible assets that may need to be liquidated in some circumstances. Both plans must work together in order to comprehensively deal with your assets so as to leave as much as possible to your surviving family members.

At Legacy Law Center, we are Michigan estate planning lawyers who dedicate their practice to protecting your interests, as well as the interests of your family. Creating a succession plan for a business is no small task, and we know that you will need guidance in navigating through this often complex process. Call our Ann Arbor office today to set up an appointment and learn how to best protect your small business.