Why Your Business Needs A Business Succession Plan

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If you’re a business owner or partner, what happens in the event of your untimely death? Or if you’re in a serious accident and are suddenly incapacitated? Without a plan for what to do next, your company could be in peril. Fortunately, you have the option of creating and executing a business succession plan. Business succession plans not only to clarify what happens if someone dies or loses capacity. They also mitigate potential losses and risks that could threaten your entire organization. Working with a New York business law attorney, you can prepare for the unexpected.

The Basics of Sound Business Succession Planning

A business succession plan is useful for anticipating an owner or partner’s sudden death or incapacity. But the plan can also cover other, less serious events. Life changes are inevitable, and the people in charge of your company won’t be there forever. They may decide one day to leave the company or retire. The sudden loss of an owner, partner, or other personnel (e.g. manager), for whatever reason, could spell trouble. Your business could be left without a clear leader or plan for what to do next. That will mean disarray, lost productivity and lost revenue.

But a New York business law attorney can help avoid or minimize the risk of these things happening. That’s where good business succession planning is key. A comprehensive plan can accomplish numerous objectives, including:

  • Preventing disputes from arising within the company. Without you, the owner, in charge of the company, there could be a power struggle among employees or managers. A succession plan lays out who will assume authority in your absence. It also prepares for replacements in the event other leaders leave the company.
  • Retaining essential employees. To discourage key leaders from leaving your company, a properly drafted plan might offer incentives for them to step up. The plan can also provide for non-compete agreements to protect the business if these employees decide to leave anyway.
  • Reassuring your stakeholders. Investors are more likely to stick with your company if they understand how emergencies and other exigencies will be addressed. When stakeholders are comfortable, your business is more likely to be stable after an unexpected change.
  • Reducing stress on you and others. Knowing there is a plan in place to handle major life changes will have the added effect of reducing stress. This, in turn, makes it easier to run your business and helps you focus on your company’s success.

One of the worst things that could happen after a disruption to your business is instability. You need to maintain confidence both inside and outside your organization. A New York business law attorney can help you execute a succession plan with terms that address the following:

  • What happens to the ownership of the business, or shares, after a major change. A plan can require, for instance, that a family-owned company will remain in the control of the family.
  • Whether interested parties, like employees, may receive the shares belonging to the exiting or deceased owner. This is often done on a right of first refusal basis.
  • How to ensure the company maintains an adequate cash flow. The company needs to keep paying its bills, as well as expenses that arise after an unexpected change.
  • Protecting institutional memory. When management changes hands, new people will bring their own ideas to the company. But upholding significant traditions is essential to the company’s identity, and a plan can do this.

You’ve Worked Hard For Your Business – Don’t Leave It Vulnerable To Life’s Changes

Succession planning is like estate planning for a business. Although few people want to discuss it, it’s an absolutely essential topic to prepare for the future. Without a plan, everything you’ve built could be in jeopardy when life changes occur. Rosenbaum & Taylor can help your company draft a careful, comprehensive business succession plan. Call today to learn more about how one of these plans can serve your company.

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