Building a business is in no way a day’s job; it takes years to build and it becomes part of your legacy with time.
So, what happens to your business when you die? One thing is certain: if you don’t have a plan in place, everything will fall apart, especially if you don’t have a business succession plan in order. In some cases, succession gets decided in court, and the result might be against your wish.
Things don’t have to turn out this way. Why not take action now and put your Idaho business on the path to continued success? Depending on the type of business, you should be able to map out your succession plan in your will, testament, business operating agreement, or buy and sell agreement.
If you are confused about how to go about this, it’s best to consult with an Idaho business attorney. At Generations Law Group, we have decades of experience in succession plans and will help you explore your options for business succession and guide you through the necessary steps.
What Should I Consider When Planning My Business Succession?
Before you map out a succession plan for your business, it is important to have the following at the back of your mind:
- Evaluation of your business type.
You’ll need to answer the following question: Is your Idaho business a sole proprietorship, partnership, corporation, or limited liability company?
The type of business you are operating affects more than just taxes and the daily operation; it also influences your available succession plans.
For example, if you operate a sole proprietorship business, you also have a sole ownership interest. This means you can choose who you want to inherit the business after you are gone without seeking anybody’s opinion. But when there is more than just one owner, you no longer have that exclusive right.
- Determine who gets the business.
Most times, business owners’ first line of succession is always a family member; which is not a bad idea. Other times business owners prefer if the business is sold and proceeds are distributed to their selected beneficiaries. Business owners can also leave the business to non-family members or even charities.
Another option is allowing the business operation to continue while the interest is left in the hands of one or more co-owners. In this case, a buy-sell agreement can ensure that the decedent’s beneficiaries do not unintentionally become owners.
- Make plans for management and ownership.
When you have a business plan in place, it should go beyond just naming a successor. It should be able to address other issues like support and training of the successor.
You will also need to appoint who will be responsible for running, being in charge of employee relationships, and managing your business. Planning will help your business stay afloat even after you’re gone.
- Be innovative.
Your trust or will, operating agreements, and buy-sell agreements are the essential documents you need to state what will happen to your business after you are gone. Without these documents, there are other ways to pass down a business. You will be required to state a trusted person who is to fill your shoes at the time of your death.
What Are The Negative Effects of Not Having a Plan?
If you don’t have a business succession plan in place, it could lead to many conflicts.
This dispute will be suffered by your desired heir(s) and can even affect the business you spent years building directly.
Here are some potential risks of not having a business succession plan:
- Business assets and ownership will go through probate. Whether you have a will or not, every business asset, including the ownership interest, must be subjected to a probate process when the owner dies.
This is not going to be a problem if you already have a succession plan in place. The assets will be divided among your beneficiaries based on state law if you don’t. At this point, it is unlikely that your business will end up with the successor you would have in mind.
- Your estate pays for the cost of probate. But if you have already put succession plans in place, you will be able to transfer your business assets outside of probate; this will leave more value for your heir.
If you manage to avoid probate, you may also be able to reduce your estate’s exposure to federal estate taxes.
- The business fails.
Having a succession plan in place will in no way guarantee the success of your business when you are gone. Although you may not be alive to witness this, you can set up your business for success by putting measures in place; you’ll be surprised to see that little details count.
Whoever you choose as your successor must also be able to flow with your already existing associates and have an interest in your line of business and the best interests of your family.
Why Contact Generations Law Group?
A good understanding of business succession and the importance of creating a comprehensive plan will keep your business running long after you are gone.
Don’t just leave it to chance. Contact our Boise, Idaho-based Generations Law Group business law professionals about how to protect the legacy of your business.