Type: Law Bulletins
Date: 05/11/2016

Four Tips for Successful Business Succession Planning

Business owners focus on the day-to-day needs of their businesses, as they should, but typically fail to take time to plan for the continuation of their businesses when they retire or can no longer act. Planning for current and long-term needs can reduce taxes and provide liquidity if taxes will be due or if family needs require cash. And planning can also ease possible conflicting interests among family members.

Here are four simple actions that business owners must take:

  1. Prepare a will and powers of attorney. A business owner should have an estate plan. If there are no estate planning documents in place, the business owner's estate, including the company, must go through probate. That means that the company must be appraised and the valuation listed on the estate's inventory of assets. Most probate courts (including Hamilton County, Ohio) are online. People used to go to the courthouse and physically look through files to learn the value of estate assets (such as a company's), but not today. With the convenience of technology and the Internet, probate information is available with a few clicks in many states and counties.
  2. Coordinate and Update Buy-Sell Agreements. Often, a buy-sell agreement is established between a business owner and another party. The agreement may require the other party to buy the business owner's interest upon his or her death. If this agreement is not consistently reviewed, the other party (or the surviving spouse) may be at a disadvantage if the business owner dies.
  3. Plan for Incapacity. Lack of planning is becoming a severe issue for aging business owners (i.e., baby boomers and their parents). If a business owner suffers an injury and is not mentally capable of making decisions or running the company, decisions that require a vote of the shareholders cannot be acted upon unless there is a power of attorney. The power of attorney would allow someone to vote the business owner's interest so that issues and opportunities are not missed.
  4. Make Sure Advisors Talk. Old insurance policies should be reviewed with all advisors (CPAs, attorneys and the insurance agent) to make sure they will do what was really intended and to confirm that the policies are owned by the correct person/entity and the premiums are paid by the correct person/entity. Business owners should make sure that the owner and beneficiary of the policy are correct.

Our private client attorneys draw on the expertise of attorneys from the firm's estate planning, tax, business and finance, real estate and labor and employment practices to ensure proper planning for business owners. We encourage you to contact us with any questions.

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