Business Succession Planning
Every business requires an effective leader whether he or she is an owner, executive or shareholder. In the event of the death, illness or retirement of such a person, the business may be left in crisis mode as it tries to recover assets and locate a suitable replacement for that key member. Any business, no matter what size, can avoid such a crisis by formulating a succession plan with an experienced and knowledgeable attorney.
Without a succession plan, the stake of the owner, executive or shareholder may either be passed on to family members through the estate, absorbed by other shareholders, or some combination of the foregoing. There is a potential for conflicts to arise between the relatives in family-owned businesses. Those who were more involved with operations of the business may believe they are entitled to a larger share than others who were less active.
With larger companies, customers and employees may abandon the business in apprehension of the uncertainty that may follow from the loss of the leader. It may not be possible for the shareholders to buy up the extra shares. An interim executive may not be up to the task of guiding the business through a shaky period. Shareholder disputes may arise in the event a spouse or other family member inherits the shares of the deceased business owner, leading to hindrance of growth and possibly losses.
Working with an attorney experienced in business succession planning, owners and shareholders can develop a plan that will eliminate or mitigate the uncertainty and instability that can result from the loss of a key business stakeholder. Typically such a plan is formulated after consultation with employees, shareholders and family members and the goals for the future of the business have been mapped out. The attorneys at Holmes & Ells, PLLC understand that there is no “one size fits all” approach to business succession planning and that such a plan must be customized to fit the unique qualities and characteristics of each business.