Business Legacy Planning: More than Business Succession

A realistic and practical plan will help ensure that the legacy of your business continues beyond the years of blood, sweat, and tears that you put into creating it. A business owner does well to regularly evaluate the key ingredients that make the business valuable to its stakeholders, now and into the future. If the business will have a lasting legacy, then a business owner must generally identify why the business should continue beyond the founders.

Preserving the business value for the owners and their families is often an important focus. A critical analysis of the business and industry landscape will allow the business owner to evaluate and plan for the future of the business in the competitive market. This will require the business management, officers, and owners to look both outward and inward, identifying risks and opportunities in the market while also retaining and empowering key employees. Continuity of business knowledge, including trade secrets, key vendors, client lists, and other valuable goodwill, is crucial as the founder steps away from active management. It is no surprise that the existing employees, managers, and co-owners are often key players in the succession of the business.

If the future of the business lies with one or more of the founder’s children or other family members, then the next generation should have an established record of meaningful involvement in the business. Within the family, business succession presents a unique opportunity for efficient tax strategies and rewarding succession planning, but new and challenging issues arise when mixing business and family matters. For example, if only one of the owner’s children will inherit business interests, then the business owner should consider the practical effect of giving valuable business interests to only one of the children and may wish to balance the overall estate plan to equalize the inheritance for each child.

The governing documents of the company should be closely evaluated to support the succession plan as it is developed. This will allow an owner to retain control, if desirable, and articulate the guiding principles that have allowed the company to grow and thrive.

Successful planning takes time. A business owner thinking of the future should consult with trusted professionals to begin the discussion before it is critical. A counselor at law knowledgeable in tax planning and business succession can be invaluable as you instill your business legacy.

Fletcher represents clients and families in the design of wealth transfer plans, including lifetime and testamentary transfers. He can be contacted at frush@williamsparker. com or 941-552-2563.