When thinking about your business’ future, it is important to take as much care and consideration in developing the succession plan as you take in every aspect of running your business. Of course, each business has unique needs that cannot be addressed through a one-size-fits-all approach. At the Preddy Law Firm, P.A.
, founder Rose Marie Preddy helps organizational clients across all industries develop comprehensive succession plans. Rose Marie Preddy draws on more than 25 years of hands-on experience working with firms ranging from small, family-run businesses to multi-national closely held businesses. The firm considers and discusses all contingencies, so our clients can rest assured that the future of their business rests in capable hands. As a boutique Florida business succession law firm, we offer each client personalized attention that larger law firms cannot provide.
What Is Business Succession Planning?
Business succession planning addresses how you will pass control of a business to another once you can no longer run the business, either due to death, incapacity, retirement, or sale of the business. For owners of family-owned businesses, there may be an understanding that a member of the next generation will take over the business. However, for larger businesses, new management may come from the current pool of employees or even an outside source. Regardless of who the successor is, a business succession plan focuses on making a smooth transition to the new management team and ensuring they have the necessary skills and knowledge to successfully run the business. A successful business succession plan will accomplish three primary tasks:
- Prepare the organization’s finances for the transfer of ownership
- Ensure the proper drafting of all necessary legal documents
- Identify the source of funding to pay for the transfer of ownership
- Prepare the future management team to successfully run the business
By addressing these issues now, business owners can save significant time and expense in the future.
Types of Florida Business Succession Plans
The starting point for any Florida business succession plan involves identifying your future goals for the business. Broadly speaking, there are two types of succession plans: retention plans and buy-sell agreements.
Most businesses owe their success to the dedication, talent, and knowledge of those within the organization. For business owners who plan to pass the business off to a successor, ensuring that the current talent (as well as the selected successor) remains with the business is a critical concern. A few of the key concepts in a business succession retention plan include:
- Assessing current employees’ talent
- Identifying the skills the new management team must possess
- Focusing on employee development
- Relying on internal recruitment
A Florida business succession planning lawyer works with business owners to develop a retention plan that will keep employees and management with the company, ensuring its continued success.
Family businesses and other closely held companies are not always easy to sell. For example, finding a buyer and identifying the market value of the business can be challenging, especially in the event of death or incapacity. Other more complex concerns can also arise, such as:
- Preventing unqualified people from obtaining a controlling interest in the business
- Assuring employees of the business’ continued viability
- Helping current owners use their existing interest as a source of retirement income
- Minimizing business disruptions due to disagreements between stakeholders
A buy-sell agreement can address each of these issues. A buy-sell agreement is a contract in which you agree to sell your business and another person agrees to buy it, usually at the time of a triggering event. A triggering event could be your retirement, death, or desire to sell the business. One of the issues that frequently comes up with buy-sell agreements is that the future buyer may not have the assets to purchase the businesses. At the Preddy Law Firm, P.A., we can help you and the buyer of your business fund a buy-sell agreement. One way of doing this is by using a life insurance policy. For example, if you name the future buyer of your business as the beneficiary of a life insurance policy, they can use the proceeds from the policy to fund the buy-sell agreement. Another option involves the future buyer making payments into a special account. When you decide to retire or otherwise leave the business, the buyer continues making payments until they have paid the entire agreed-upon value. This arrangement can provide you with a reliable source of income well into retirement. Business owners can get ahead of these issues by enlisting the assistance of a Florida business succession attorney now.
Naming a Qualified Successor
One of the most critical elements of a Florida succession plan is selecting your successor. It is important that your successor has not only the knowledge and skill to run the business, but also the passion and drive to run it successfully. It is natural for many business owners to want to pass the business on to members of the younger generation, whether it be to children or grandchildren. However, naming an unprepared successor can drive your business into financial ruin. Before naming a successor, consult with an experienced Florida business succession planning attorney to make sure that if they are not ready to take over the business today, they will be by the time they need to. If special licenses are needed, planning needs to be in place to ensure the successor has the property qualifications and licenses to own the company.
Securities Issues Related to Succession Planning
Any transfer or sale of stock must comply with state and federal securities laws and regulations
. Thus, for businesses with shareholders, creating a business succession requires familiarity with securities law. If possible, business owners should consider drafting their shareholder agreements in such a way that prevents the possibility of other shareholders rejecting the person you name as your successor.
How a Florida Business Succession Lawyer Can Help
At the Preddy Law Firm, P.A., we assist entrepreneurs and other business owners with all their business succession needs.
Preparing Important Business Documents
Successfully transferring ownership of many closely-held businesses, such as partnerships and corporations, requires a thorough review of existing documents and the thoughtful drafting of new agreements. Our Florida business succession planning attorneys command an impressive knowledge of all business organizations, their requirements, and how to arrange for their smooth and effective transfer.
Developing an Exit Strategy
The thought of leaving a business can be overwhelming, especially if there is no apparent successor. We can work with you to develop a custom-tailored plan to either pass on your business to the next generation or sell it to a third party, so you can move ahead with your life without worrying about what will happen with your business.
Addressing Business Liquidity Issues
Freeing up liquid capital can be a major challenge for small businesses, especially at or near the time of an anticipated transfer. At the Preddy Law Firm, P.A., we work with business owners who are having difficulties meeting their financial obligations to develop practical solutions to solve liquidity crises.
Reducing a Business’s Tax Liabilities
The sale or transfer of a business raises complex tax implications. Our firm commands an impressive knowledge of the junction between tax and business law and use it to help reduce or defer our clients’ tax burdens.
Planning for a Business Owner’s Retirement
The sale or transfer of a business provides a unique opportunity for business owners to fund their retirement through traditional or non-traditional means. At the Preddy Law Firm, we advise business owners who have traditional retirement accounts on how they can continue to maintain their standard of living. We also help business owners develop creative plans to use their existing interests in the business to fund their retirement.
Contact the Jacksonville Business Succession Legal Team at the Preddy Law Firm
If you have not created a business succession plan or need to update your plan after a change in circumstances, give the dedicated business succession planning firm, Preddy Law Firm, P.A., a call. We understand the process of getting started may feel overwhelming. However, we’ve developed a straightforward approach to business succession planning that makes it easier on you, while ensuring we cover all the bases. We also handle all types of other complex Jacksonville estate planning matters, including will contests, the fiduciary misappropriation of trust assets, and contested incapacity cases. Whatever your estate planning needs are, the Preddy Law Firm, P.A. can help. To learn more, call 904-665-0005 to schedule a consultation. You can also reach us through our online form.
Our experienced lawyer also handles other types of cases, including: