Hammonton Business Succession Lawyer
Hammonton Estate Planning Lawyer
Any business owner knows it takes a lot of hard work and dedication for a business to be successful. Many business owners do not just want their business to be successful today, but for years into the future. To do that, all businesses need a leader at the helm. Unfortunately, too many businesses are unprepared for the illness, death, or retirement of that leader.
A Hammonton business succession lawyer can help businesses plan for succession as part of a thorough estate planning strategy. An attorney will protect the assets of a business and ensure the continued operation when the current leader is no longer able to run it. A lawyer will also ensure a smooth transition and work with financial professionals to properly value the business and protect the best interests of business owners and their loved ones.
Choosing a Legal Structure
It is important for clients to work with a Hammonton business succession lawyer throughout the entire lifecycle of their business. This includes even before the company has even started doing business. An attorney can provide the necessary guidance and advice during the business formation phase and can help business owners choose the appropriate legal structure. Some of the most common business structures throughout New Jersey include:
- Subchapter S-corporation
- Subchapter C-corporation
- Partnerships (including LLPs)
- Limited liability company (LLCs)
- Joint ventures
When helping form a business, an attorney will prepare the documents necessary to the foundation of the business, including the articles of incorporation, bylaws, obtain the necessary business licenses and tax identification numbers, and will submit the necessary state filings. A lawyer will also know how to negotiate and prepare underlying business agreements, including shareholder agreements, operating agreements, and partnership agreements so business owners can achieve their long-term goals.
Planning for Business Succession
Perhaps the most important aspect of planning for business succession is selecting a successor or someone who will take over a business when the current leader can no longer run the company. The successor chosen will depend on several different factors, including the parties involved, the basic structure of the business, and the nature of the business. When family-run businesses do not have a succession plan, disputes can quickly arise between family members. Also, when businesses do not have a succession plan, conflict can arise between family members and the partners within a business about who will control the business.
The best person to take on the role of leadership is the person who is best able to run the business. It is also imperative that guidelines are established for the continued operations of the business, which will include the clarification of the roles of the successor. A procedure for resolving disputes must also be established at the same time.
Valuing a Business
One of the most important components of any business succession plan is to determine the value of a business. This can be done in one of three ways – the income approach, the asset approach, or the market approach.
- The income approach: The income approach involves combining an analysis of projected future earnings with past earnings. When capitalization and future cash flow can be determined, the present and future value of a business can also be determined.
- The market approach: The value of a business can also be determined by analyzing other businesses in the same industry that have recently changed leadership through a sale. The most important factors when using this approach include the duration, market risk, and size of the business.
- The asset approach: The simplest method of valuing a business, involves evaluating the assets of a business and subtracting the liabilities. Essentially, this is an examination of the balance sheet of the business and it does not account for goodwill or market conditions.
No matter which type of approach is used when valuing a business, the goal is to always arrive at an accurate and fair business valuation to protect the interests of the current owner, as well as the protecting the interests of family members and partners.
The Transfer of the Business
When a business is transferred from one owner to another, the transition must be smooth and seamless. This often involves the negotiation and preparation of important buy/sell agreements. In general, there are two methods used when a business is transferred, which are entity purchase agreements and cross-purchase agreements.
With an entity purchase agreement, the business will purchase a single policy on every partner, with the business being named as the beneficiary in each policy. If a partner passes away, the business will then use the proceeds to redeem the share of the deceased owner. Essentially, this will raise the value of the shares of the surviving owner.
Cross-purchase agreements are often the best choice for businesses with only a few owners, such as a partnership. In this situation, every partner will purchase and own an insurance policy on the other owners. If one of the partners passes away, the value of the policy is paid to the beneficiaries, which are the other owners. The proceeds are then available for the surviving partners to purchase the deceased’s partner’s share of the business.
Contrary to what many people believe, a business succession plan should be put in place during the business formation stage. This can greatly help reduce any conflict that may arise between partners, family members, and minority investors.
Call Our Experienced Business Succession Lawyer in Hammonton Today
At Scott Counsel, P.C., our experienced Hammonton business succession lawyer takes the time to understand the unique goals of business owners, the role of family members, and the nature of other ownership interests. We know that the sudden death of a partner or business owner will have a significant impact on any company, so we assist with succession plans to make it as smooth as possible. If you are starting your own business, call us today at (856) 485-4585 or contact us online to schedule a consultation and to learn more about how we can help.
– When my son, who has Cystic Fibrosis and CF related diabetes, was suddenly and unexpectedly removed from his Medicaid program, we were devastated and frightened not knowing where we would get the resources to pay for his extremely high priced prescriptions. Justin was the attorney who handled our case. From the very beginning, he proved to be very thorough and experienced with navigating the process of reversing the Medicaid decision. However, it was his apparent kind, caring nature that made us feel the most at ease. Justin was successful in securing a continuation of benefits for my son, and we are extremely grateful for having his expertise during this most stressful ongoing process. Thank you, Justin!
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