Helping Arizona Business Owners Prepare for the Next Generation

Succession planning is often a neglected aspect of business preparations and estate planning. Often, business owners wrongly assume that other family members will take their place when they are ready for retirement.

However, unlike in the past, many individuals are not interested in taking over family businesses, which may result in a forced sale after the business owner dies. In other instances, vital employees retire, pass away, or leave the business due to health concerns, which can harm productivity.

Therefore, one of the best preemptive steps business owners can take to ensure their company continues to thrive is developing a well-crafted business succession plan. The AVID Esq. Group, LLC of Arizona has an experienced team that will thoroughly evaluate your business needs and help you create a plan to ensure the business thrives after a change in leadership.

What is Business Succession Planning?

Business succession planning is a well-developed legal strategy that provides guidelines for what will occur when the owner dies or leaves the company. However, one of the most critical aspects of business succession planning is how ownership will be smoothly transferred from one person to another.

Small and family-owned companies typically benefit the most from business succession planning. Small businesses with multiple owners often utilize buy-sell agreements that prevent the selling owner from transferring their interests to anyone outside the business entity without the consent of the other partners.

In family-owned businesses where the owner wishes to maintain control until their death, succession planning can be carried out through a well-crafted estate plan. In cases where the family business has family members or other shareholders to consider, business succession planning can offer asset protection against creditors or other outsiders who may try to collect debts.

Being proactive and planning can ensure that the organization continues functioning fully during a leadership change while minimizing risks and potential disruptions.

If you want to learn more about how estate planning can safeguard your family business for future generations, contact the AVID Esq. Group, LLC of Arizona

What Are the Most Essential Steps in Business Succession Planning?

The most significant aspect of business succession plans should be identifying the successor when it is time for ownership to change hands. Unfortunately, many once-prosperous businesses have fallen victim to a bad choice and lack of succession planning.

Some of the most essential steps in a business succession plan include:

Ownership succession: A well-tailored business succession plan will determine who should fill the leadership role should the need arise due to owners retiring or being unable to fulfill their duties.
Succession funding: Determining how the succession of ownership should be funded should be decided ahead of time so that if a crisis arises, there is clarity and no debate about where the money should come from. Many businesses utilize other partners’ insurance payments, internal funding, or equity.
Tax considerations: Any change in company ownership can have tax implications depending on the type of business formation utilized by the organization. Therefore, to create a smooth succession plan, it is essential to understand the corporate laws and tax considerations of the business entity.

To ensure you have a sound business model in place when it comes time to change management or a new successor takes over, you need a plan that will provide details to make the transition go smoothly. Contact our law offices to schedule a meeting to learn how to protect your business interests.

What Are the Potential Risks of Not Creating a Succession Plan?

If a business fails to create a well-thought-out succession plan, the organization, employees, and shareholders may all suffer losses.

Some of the most common problems that result from the lack of business planning or poor planning include:

Unqualified new leadership: Choosing an unqualified candidate in a rush to find a replacement for outgoing management or ownership can lead to the business making other poor decisions that may affect its value and reputation.
Loss of skilled employees: If clarity is lost in the workplace due to a lack of a well-organized succession plan, skilled employees may look for other, more stable opportunities.
Lack of trust: The longer it takes to transition from one owner to another can cost the company time and affect its hard-earned public image. Often, individuals associated with the business, such as clients or customers, need more faith and decide to take their business elsewhere.
Business depreciation: If a business suddenly changes hands and appears to lack leadership, goals, and direction, the public, clients, and customers may need more confidence they will receive the same quality service they had under the previous owner. In many cases, this leads to the business losing value.

Some other potential issues that can arise when a company or business fails to have a succession plan in place include becoming vulnerable to competitors, potential internal conflict, and becoming vulnerable to competitors as the company tries to recover from a lack of leadership.

Nevertheless, one of the simplest means of avoiding conflict and the potential for a business to fail or suffer a series of setbacks is to consult with an experienced business attorney. The attorneys of the AVID Esq. Group, LLC can help you create a detailed plan to help you have confidence to face the future.

What Makes Your Business Succession Planning Attorneys the Right Choice for My Legal Needs?

The AVID Esq. Group, LLC of Arizona is a law firm passionately committed to helping businesses thrive through owner and leadership changes.

Our business attorneys have extensive experience helping small business owners and corporations create plans to safeguard their investments and protect employees. Through careful planning, we can also ensure that business assets will remain with the company should there be leadership changes.

If you are a business owner considering retirement or looking to sell your business to a new management team, contact the AVID Esq. Group, LLC of Arizona, at 480-467-5636 and ask to schedule a consultation with a qualified legal team member who can answer your questions and help you explore your legal options.