Moorestown Business Succession Lawyer
Moorestown Business Succession Lawyer
Starting a business isn’t easy. People spend hundreds of hours a month trying to gain a foothold in the market and then years struggling to make the enterprise grow. With so much to do—hiring employees, finding new company headquarters—few owners think about what will happen to the business when they die or retire.
Now is the time.
Business succession planning is a deliberative process that owners engage in when thinking about how they want to exit a business. It answers the question, “What happens next?” Without adequate succession planning, some businesses are sold or a family could lose control of a business to outsiders. Don’t let that happen. Instead, contact a Moorestown business succession lawyer today.
Why You Need to Engage in Business Succession Planning
Succession planning helps clients manage risks to the business and incorporate it as part of a comprehensive estate plan. For many, their small or family business is a major asset—maybe the largest they own. This asset is vulnerable without succession planning.
Consider the following trigger events:
- You die. You might be thinking, “Won’t my children inherit everything?” That could be true depending on your will, but many problems arise. For one, the estate might owe taxes when there isn’t enough cash. The only asset to sell might be the business. In other situations, you might leave a business to your 3 children, but only 1 has really worked in the business. Do you want all 3 to have an equal say in how it is run.
- You become sick. If you can’t work, the business could be harmed. You need someone who can step in and perform the tasks that you do.
- You get divorced. Chances are some or all of the value in your small business will be considered marital property—even if your spouse never spent a day in the office. If you can’t buy out your ex’s share of the business, you might need to sell it.
- You retire. This is at least one trigger event you control. Still, many people don’t know who will run the business after they retire. Our clients also want to maximize the income they get from the business to help support them in their golden years.
Business Succession Planning: What Is It?
Now that you know the risks, how does an attorney protect a business from them? At Scott Counsel, we can assist clients in the following:
- Considering all business succession options
- Creating an exit strategy
- Communicating the exit strategy to family and business stakeholders
- Identifying your goals for the business at retirement
- Creating buy-sell agreements to protect the business in the event of divorce or illness
- Considering tax implications of lifetime transfer of business assets
- Engaging in business valuation
- Changing the business structure
There is no single succession plan that is right for everyone. For example, you might want to transfer the business while living to your children while retaining a stake as a limited partner, which can provide income in retirement. Alternatively, you might run the business until death or incapacity and leave the business via your will to your children with enough cash so they can pay all estate taxes without selling business assets.
For some business owners, selling a business will be the right move. After all, maybe none of your children have the aptitude or interest in owning it after you are gone. If mismanaged, the business will only decline in value and possibly fold. Instead, selling when you are ready to retire is the best way to maximize your business value to benefit yourself and your family.
Protect a Family Business for the Future
Many people would love to see their children carry on the family business and then for their grandchildren to take it over. However, statistics show that very few family businesses survive into the second generation, and almost none are operating in the third or fourth generation:
- On average, the typical family business lasts 24 years
- 40% of family businesses are still running at the second generation
- Only 13% of family businesses are running at the third generation
- A meager 3% are running in the fourth generation
Succession planning cannot guarantee that your children or grandchildren will run the business as well as you do—or that they won’t sell it or shut it down. But proper planning increases the odds that the foundation you have laid during your life will not go to waste. At Scott Counsel, we can discuss which of your family members are best suited to run the business and what legal documents can ensure their promotion to ownership or control of the company.
Business Succession & Estate Planning
For small business owners, business succession planning should go hand-in-hand with their overall estate planning. If they do not engage in both at the same time, many people will end up dissatisfied with the results.
Consider the following example. A business owner wants to leave his estate in roughly equal portions to his three children. However, he also wants to leave his small business solely to his eldest child who is currently working there. He might put the business in trust for his eldest child but then divide the estate equally in a will.
Unfortunately, any assets in a trust are not in the estate to be divided. Consequently, his eldest will receive a lopsided amount of assets because the business was not included in the will. Proper business succession planning coupled with estate planning could have avoided this unhappy result.
Another key problem is taxation, especially estate taxes. If your small business is large, then your heirs could end up needing to liquidate business assets just to pay off Uncle Sam.
It’s Never Too Early to Engage in Succession Planning
Ideally, business owners will have at least a rough succession plan in place as soon as they form their business. They can then update it as business and personal circumstances change.
Even if your business is decades old, you should begin planning now. Contact Scott Counsel today to create a roadmap to the future for you and your business.
– 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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