Mullica Hill Business Succession Lawyer
Mullica Hill Business Succession Lawyer
Business owners work hard and dedicate themselves to building their business into a success. Business owners are also not only worried about the success of their business today but for many years to come. For that to happen, all companies need someone to lead the business into its continued success. Still, a lot of owners are so busy running their business, they do not give their retirement, illness, or even death enough thought. When any of those events occur then, the business is left without a leader.
Everyone needs to have a comprehensive estate plan in place, but this is particularly true for business owners. A Mullica Hill business succession lawyer can plan for a business’ success to continue without its current leader and ensure a smooth transition while protecting the assets of the business. Attorneys also have a network of financial professionals they will rely on who can properly value the business and protect the best interests of not only the business owner but also their loved ones.
Establishing the Right Legal Structure
All business owners should enlist the help of a Mullica Hill business succession lawyer from the time they are thinking about starting up a new company to the time when they are ready to let someone else take the helm. A lawyer can provide the necessary advice on how to set the business up for success, which starts with choosing the right business structure. Some of the most common business structures in Mullica Hill are as follows:
- Limited liability companies (LLCs)
- Subchapter C-corporation
- Subchapter S-corporation
- Partnerships (including LLPs)
- Joint ventures
A lawyer can help a business by preparing the necessary documents for the formation of the business, including the bylaws, articles of corporation, and obtaining the appropriate tax identification numbers and business licenses. Forming a business also means the preparation of many legal documents, including partnership agreements, shareholder agreements, operating agreements, and more. All of these help business owners set and achieve their goals for the future, as well as ensure there are as few problems as possible in the years to come.
Planning for a Successor
Although it is not something many business owners want to think about, one of the most important aspects of starting a business is thinking about who will take over when the current owner can no longer lead the business. There are many different factors to consider when thinking about who will run the business in the future. These include the legal structure of the company, the nature of the business, and the parties involved. It is sometimes most important for a successor to be named in family-run businesses. Without one in place, disputes can quickly arise between family members when the current owner can no longer act as the leader.
Business owners must name a successor who is best able to take on the leadership role when they can no longer fill it. For the business to continue operating, guidelines must be established and the role of the successor must be clarified. A specific protocol for resolving disputes should also be outlined so they are more easily handled when they arise.
The Valuation of a Business
The value of a business is a very important aspect of business succession. The three most common ways to establish the value of a business are the market approach, the income approach, and the asset approach.
- The market approach: Determining the value of a business using the market approach relies on evaluating the value of a company that has just sold and changed leadership. The market risk, size of the business, and duration of the business are the most important factors to consider when using this method.
- The income approach: When using the income approach, the past earnings and projected future earnings must be analyzed. Once these can be determined, it is then much easier to determine not only the present value of the company but the future value, as well.
- The asset approach: The most basic way to value a business is to evaluate the assets of the company and then subtract the liabilities. This is analyzing the balance sheet, but it does not take market conditions or goodwill into consideration.
Regardless of the method used when valuing a business, the goal is always to determine a fair and accurate value of the business so the interests of the current owner, partners, and any family members are protected.
Transferring the Business
A smooth and seamless transition is always important any time the ownership of a business is changing hands. This involves preparing important buy and sell agreements, as well as effective negotiating. There are generally two methods used when transferring a business and they are a cross-purchase agreement or an entity purchase agreement.
Cross-purchase agreements are usually used by companies that have just a few owners, such as a general partnership. In these scenarios, all partners purchase and own an insurance policy on the other partners or owners. If one partner passes away, the value of the insurance policy is distributed to the other partners, who are named as beneficiaries within the policy. The surviving partners then use the proceeds to purchase the share of the business once held by the deceased partner.
Entity purchase agreements involve one policy being purchased for every owner, and the business is named as the beneficiary in all policies. If an owner dies, the proceeds are then distributed to the business and the share held by the deceased owner is redeemed. This method raises the value of the shares of the surviving owners.
Call Our Business Succession Lawyer in Mullica Hill for a Consultation Today
If you are starting a business or do not yet have a succession plan in place, our Mullica Hill business succession lawyer at Scott Counsel, P.C. is here to help. Call us today at (856) 672-7248 or call us online to schedule a consultation and to obtain the sound legal advice you need.
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