October 9, 2020
When it comes to small businesses, every worker is essential. Most small businesses cannot succeed without the drive and dedication of owners and their families. The sudden loss of key personnel, however, can stop your business in its tracks. If a founder suddenly passes away, COVID-19 impacts essential employees or a manager leaves to handle personal issues, is your business prepared for their absence?
Professional business succession planning helps business owners prepare for, absorb, and manage the sudden departure or incapacitation of key personnel, including themselves. Unfortunately, most companies do not realize they need succession plans until it’s too late. As a result, America’s most successful business owners frequently have multiple succession plans to ensure their businesses thrive after unexpected management changes.
The experienced succession planning lawyers at McClanahan Powers, PLLC understand how quickly the loss of essential workers devastated small companies in 2020. Stay ahead of the game and protect what you’ve built by connecting with our dedicated Virginia and D.C. business attorneys online or by calling 703-520-1326 today.
If you don’t know the answer to this question, it’s probably time to make a business succession plan. State law generally determines your successor without a plan in place based on the type of business entity involved and applicable inheritance principles. The following default rules typically apply to business succession when owners have no takeover/buyout plans in place:
If these results do not reflect your business and personal interests, consider drafting and executing incapacitation, buyout, and corporate succession plan with one of our experienced business succession attorneys.
Even if all members agree to continue a business, the law often requires the automatic dissolution of certain entities when an owner passes away, leaves a partnership, or loses a professional license. Virginia business succession may also follow default inheritance law, resulting in drastic changes to the corporation’s management and direction. Without proper partnership succession and buyout planning, an entire entity could crumble.
The tax consequences, financial implications, and inheritance disputes associated with an owner’s sudden death or incapacitation might also sink the business. Will contests may leave remaining members unable to make critical business decisions, or the sole remaining member of a PLLC might not have the funds to buy another member manager’s interest. Heirs might also find themselves forced to liquidate individual stocks and membership interests to cover estate taxes and other liabilities associated with an owner’s passing. Additionally, unintended successors seldom have the same passion as an entity’s founding member. Heirs may agree to sell their interest or change the direction of the business itself. To create a lasting entity, you should develop strong succession, buyout, and emergency management plans.
How can a succession planning attorney help?
The law permits most entities to override default succession principles through partnership agreements, articles of organization, estate plans, or other business contracts. These agreements may set both a successor and clear guidelines for a business entity’s future management and direction. Further, a succession planning lawyer could structure your ownership interests to pass outside your estate. Placing your stocks in trust, for example, results in the immediate distribution of the business interest to the designed beneficiary upon the occurrence of an event, i.e., retirement or death.
Planning for a key member’s retirement or incapacitation could save your business now and in the future. Business succession lawyers commonly recommend executing contracts addressing the following relevant concerns:
At McClanahan Powers, PLLC, our dedicated business succession lawyers could help you prepare for retirement and the unforeseeable loss of critical members and owners. They might also help you develop long-term management principles to ensure your company operates according to your core values. Consider speaking with our Virginia and D.C. succession planning and business development attorneys from preventing inheritance disputes to ensuring your business’s continuation upon incapacitation. Call 703-520-1326 to schedule your comprehensive succession needs assessment or connect with our virtual Vienna or Pennsylvania Avenue offices online.