Michigan businesses of all sizes should have a succession plan in place in the event of untimely circumstances surrounding a shareholder, partner, owner, or key team member. A clear plan of succession can prevent confusion and control disputes. Our professional Business Succession Planning Lawyers have helped many companies set up effective business succession plans. Contact us for help setting up your Business Succession Plan.
When a business owner, partner, shareholder, or other key member of the business retires, suddenly becomes incapacitated, or dies, your business can be left on an unstable footing that can lead to serious ownership and control disputes. Businesses of all sizes should have a thoughtfully prepared business succession plan that is agreed on mutually by all stakeholders.
Selling Your Business to a Co-Owner
If you established a business with a single partner, it is common to designate the co-owner as a potential successor. In fact, many partnerships craft a mutual agreement early on that declares the intent of the surviving business partner to purchase the remaining interest from the deceased partner’s next of kin in the event of an untimely death.
Such an agreement can help ease the burden of an unexpected transition for both the business and family members. Commonly known as a “buy-sell agreement,” this ensures that the family of the deceased partner is given fair compensation while the remaining co-owner retains control of the business.
Passing Your Business On to an Heir
This is a popular choice for business owners who have family members working in the company. Of course, the first and most important questions is who will gain control of the business? If there are a number of children or family members involved in the business, this decision can become complicated very quickly. Especially if more than one are interested in taking over the business. You will need a clear plan that explains which family member will control what aspect of the business, as well as how other heirs will be compensated.
Many succession plans include a buy-sell agreement, in which your heirs who are not active in the business agree to sell their shares to active members. It is usually better to choose a single successor to be in charge, even if other family members are placed in control of divisions within the company.
Selling Your Business to a Key Employee
When a co-owner or family member is not available to take control of the business, it is not uncommon for owners to consider selling it to a key employee. By choosing an employee who is experienced, business-savvy, and respected by existing staff and workers, you can significantly ease the transition for everyone involved. Plus, by choosing now, there is time for essential training and familiarization to take place.
Just like when selling your share of a business to a co-owner, a key employee succession plan requires a buy-sell agreement. The employee in question agrees to purchase the business at a predetermined retirement date, or in the event of death, disability, or other circumstance that renders you unable to manage the business.
Selling Your Business to an Outside Party
This is easier for some types of businesses than others. A turn-key operation, like a restaurant with a good general manager, will be much easier to sell outright. Your task is to demonstrate that it’s a good investment. The new owner won’t need to become very involved and will have time to focus on their other business interests.
Other businesses that require more hands-on effort, or are branded with your name, will be much more difficult to sell. Potential buyers will have to rebrand and remarket, and as a result, may not be willing to pay the price you require.
In any case, you should prepare your business for sale well in advance. This may include hiring and training a general manager, formalizing your operating procedures, and getting all the business finances prepared. This will make your business more attractive and valuable to outside buyers.
Respected Michigan Business Succession Planning Lawyers In Farmington Hills
When it comes to planning for your business succession, our Michigan Business Planning Lawyers can help you make sure your business succession plans align smoothly with your overall estate plan. Our Business Succession Planning Attorneys have many years of experience helping businesses plan for expected and unexpected transitions.
The Estate Planning Law Firm of Mall Malisow & Cooney maintains a significant presence in reputable listings such as Super Lawyers and Best Lawyers in America. Moreover, our law firm is the only firm in the state of Michigan comprised of two attorneys who are nationally Certified Elder Law Attorneys (CELA), certified by the National Elder Law Foundation.