While everyone should secure their assets, entrepreneurs must go above and beyond to protect their personal and business assets. Every company’s future depends on its ability to plan for succession. While many organizations fail to thrive following a leadership change, the existence of a sound succession plan reflects the founders’ dedication to the company’s long-term growth, continuity, and stability.
Powers of Attorney
Like with an individual, you will need to set contingency plans for unexpected circumstances such as your passing or becoming incapacitated temporarily. When this happens, it’s a good idea to have a person in place who can sign off on employee payroll, rent payments, and other business expenses that are necessary to keep your business running. You will need to allow someone else to step in on your behalf if you need them to— this can be in the operating agreement and as a separate document. The authority to do this is granted through a power of attorney.
Powers of attorney offer flexibility, and a knowledgeable attorney can help you structure your power of attorney to detail the specific duties your agent can do on your behalf.
Your power of attorney can be divided among different people, each with their talents, obligations, and abilities when conducting business. Different powers of attorney are a great option because each can be active simultaneously, giving you multiple agents to assist you with the activities your company requires.
Should I create the business estate plan and personal estate plan at the same time?
It depends. You could divide your business ownership among your heirs independently from your financial holdings. You can have some stock that must be distributed to your family in a certain method. You could appoint one or a few family members to take over critical business functions. To determine whether you must separate the two, some questions to ask yourself are:
- Should I sell my company to liquidate assets?
- Or will it be passed down to family members or heirs?
- Will the operation be profitable in the long run?
- How will it be likely to preserve its revenue?
- To keep the business operating, who needs to fill crucial roles?
- What talents are required to keep the company functioning smoothly?
- How will company ownership and sales be handled?
Succession Planning
There are many factors to consider when thinking about whether you should create a buy/sell agreement, succession plan for someone else to take over for you, or both. A succession plan may be sufficient for a small, family-owned business where the spouse or a single successor is already sufficiently invested in the business, wishes to continue running it, and can effectively do so.
However, other variables could cause serious issues for your business. What if, for example, numerous successors disagree on how to operate the business or do not want to run the business? This is common when siblings take over and have different management styles, business acumen, and talent.
Suppose you are sure you would like to pass the business over to a successor. In that case, you should know that the productive succession of an organization that preserves its worth necessitates strategic management, preparation, and documentation that solidifies the plan.
The purpose of a buy/sell agreement
This is an agreement between the partners of a business (typically a corporation, C-Corp or S-Corp) that is automatically activated when specified circumstances occur, such as death, disability, retirement, or incapacity.
It could, for example, stipulate that the surviving partners have the choice and right, but not the obligation, to purchase the former partner’s ownership from the estate within a particular time frame. Alternatively, estate owners could be relegated to non-voting ownership.
United Kingdom Estate Planning Lawyers Near You
Salvo Law can assist you in developing a plan to ensure the sustainability of your business after current management retires and to maximize the likelihood of a return on investment. If you need assistance crafting the perfect estate plan for your unique needs as a business owner, contact us. We’re here to help. To schedule a free consultation, you can call +4420718382404 or easily fill out our online contact form.
