Whether your business is a startup or has been established for generations, it must have a well-crafted business plan for both success and succession. You no doubt want your business to grow and be a foundation for your family’s financial security. In most cases, you also want it to continue to thrive when you are no longer in charge of daily operations. If these are important goals for you, and you are located in Louisville, Cincinnati, or the surrounding area, contact the skilled business planning attorneys at Shaw & Nelson, PLLC.
Business planning is an essential part of the estate planning process, especially for the family businesses that make up the majority of small businesses in the U.S. Your business is likely your most valuable asset and you may consider it the central portion of your legacy. Our business planning attorneys will clear the path for your business to expand while you have ownership and to keep your brand alive into your retirement or if you become incapacitated, and when you pass it on to your heirs.
Of course, in some cases, you may want to sell your business when you are ready to take the next step. No matter what your desires are, our legal team is well-prepared to point you in the right direction and guide you through creating and implementing the business plan that best fits your situation.
Business Formation Services Shaw & Nelson Provides
If you are creating a startup, once our business attorneys have met with you and come to understand your business goals and priorities, we will be able to advise you about which business structure is most appropriate in your particular case. Possible business structures include:
- Sole Proprietorship
- Subchapter C-corporation
- Subchapter S-corporation
- Limited liability company (LLC)
- Partnership (including LLP)
- Joint Ventures
When we have helped you decide on the right business structure, we will:
- Prepare foundational documents, like Articles of Incorporation and Bylaws
- Submit required filings with the state
- Obtain business licenses and tax identification numbers for your company
- Negotiate and prepare underlying agreements (e.g.operating agreements, partnership agreements, shareholder agreements)
Most importantly, we will be at your side to provide the legal assistance and moral support to give you the strongest chance of success as you launch your fledgling business.
It’s Important to Plan for Business Succession From the Outset
Whether you are the sole owner of your business, have a single partner, or are part of a larger corporation, it is never too early to create a well-thought-out business succession plan. This involves deciding whether you want to sell your business to liquidate assets when are finished running it or want to transfer your ownership to a partner, relative, close employee, or friend.
Knowledge Your Successor Should Have or Learn Before Taking Over
It is important to seek a successor who:
- Is familiar with the particulars of your business
- Understands existing policies regarding promotions, bonuses, disciplinary actions
- Has prior managerial experience
- Is energetic and committed to the job
- Has leadership skills
- Understands how to delegate to employees with specific talents
- Understands how and when to use your company’s dispute resolutions methods*
- Is informed about all compliance laws related to employment (e.g. anti-discrimination, environmental concerns, safety)*
*These two types of knowledge are indispensable since they can help your business avoid costly and disruptive litigation
Most of all, your successor should be trustworthy and able to make thoughtful decisions timely. If, as so often happens, you want one or more of your adult children to take over the business, you should be open to the possibility that it may be necessary for them to work collaboratively with a loyal employee for a transitional period before taking the helm.
Accurate Valuation of Your Business Is Key to a Smooth Succession
There are three possible approaches to determining the value of a business.
- Asset Approach — evaluates your business’s worth by subtracting its liabilities from its gross assets. Though direct, the asset approach leaves goodwill, which can be important, out of the equation; also, though simple, this approach is not analytical nor insightful about the business’s future.
- Income Approach — analyzes past earnings and projected future earnings in terms of capitalization and future cash flow. Though more complex than the asset approach, it is more realistic in some cases.
- Market Approach — examines information about recent sales of other businesses in the same industry as yours that are similar in size, longevity, and market risk. It also offers realistic ways to market new products and services for future profit.
Our business attorneys have access to a network of financial experts who can help you determine how your business should be evaluated.
How the Actual Transfer of Business Ownership Can Take Place
Our business planning attorneys know precisely how to facilitate a transfer of your company in the most seamless way possible by drafting and executing the necessary buy-sell agreements that may be either:
- Cross-purchase agreements, most commonly used by businesses with partners, arrange for each partner to buy an insurance policy on the other partners. If one of the partners dies, the surviving partners are beneficiaries who will use the insurance payout to purchase the deceased partner’s share.
- Entity purchase agreements, on the other hand, have the business itself purchasing individual insurance policies on each partner. In each policy, the business is named as a beneficiary, so if one of the partners dies, the business uses the insurance benefits to redeem the deceased partner’s share, increasing the value of the remaining owners’ shares.
Contact Our Experienced Business Planning Attorneys Today
At Shaw & Nelson, our business attorneys make your priorities our own. We want your business to be what you want it to be and to succeed in meeting the goals you set. We also want the future of your business, whether it involves succession or not, to take shape as you imagine it should. Contact us now to find out why we have a reputation for excellence.