Long-Term Planning for Your Business
Whether you are just starting to formulate a new business or have been running your own business for several years, it is sometimes hard to step back and plan for what will happen to your hard work when you are gone. Because there are so many different ways to structure your business, hiring a business succession planning lawyer can help you understand your options and choose the right method for your situation.
The team at The Brown Law Firm, LLC has handled business succession planning in Denver for over twenty years. They have helped dozens of people plan for what will happen to their business:
- When they retire
- If they become incapacitated
- When they die
These decisions will be based on how your business is set up and how you want to approach the tax ramifications for your successor (extensive estate taxes may arise in certain situations):
- Sole proprietorship: you choose who you want to retain control of your business; this can also be outlined in your will or trust and can be transferred gradually or all at once
- Partnerships: you and your partner(s) will typically arrange a buy-sell agreement, allowing (or even requiring) your partners to purchase your part of the business
- Corporations: your ownership of shares in the business can be transferred through recapitalization (two classes of corporate stock); this can get very complicated, so we highly recommend you hire a Denver business succession planning lawyer to arrange this
- Limited liability companies (LLC): you can gift your shares to your beneficiaries over time to reduce the tax burdens of inheriting assets in one lump sum; there are limitations on how much you can gift each year
Choosing the Right Successor
A great deal of thought should be put into choosing a successor for your business. Sometimes choosing a family member isn’t always the best option. The successor should have the extensive experience, skills and character traits that will keep the business running smoothly both internally and externally. The successor you choose will hopefully continue to have a good rapport with your loyal employees so they feel comfortable staying on after you leave. This can become a sticky situation, especially if certain family members feel they are qualified for the role but you do not feel they are ready to manage the business.
Review, Review, Review
It is advisable to review your succession plan annually to ensure that you have chosen the right person(s) to carry on your legacy. Life changes such as marriages, divorces, bankruptcies, deaths, geographical moves, personal interests – for you or for the successor you have named – could greatly impact your successor choice.