Succession planning can be a drag, but it’s nothing compared to the misery that results when a plan is lacking.
Doug Bend, the legal mind behind Bend Law Group, which specializes in working with small businesses and startup companies, warns that a virtual default plan is always in place for businesses, and it leads straight to probate court.
It’s hard enough for businesses to survive the retirement or death of a founder or other vital leader, but a prolonged trip through probate court, which can take many expensive years, is a death threat. Contentious heirs can also tangle a business’s affairs to the point where it cannot break free. Finally, even when the courts finally act, they usually pass the business to the correct legal heir – but not necessarily to the party best able to lead the company forward.
The solution is simple: get busy writing a succession plan. One strategy calls for establishing a buy-sell agreement. When an owner dies, the related shares are returned to the surviving partners in exchange for a payment made to the deceased’s estate. In this way, company assets avoid probate. In many cases, partners purchase life insurance policies sufficient to make that final payment.
Sound estate planning is another solution. Seek out a lawyer who specializes in the matter who can help create a trust into which an owner can assign the relevant company assets. A trust arrangement avoids probate and streamlines the process of passing the owner’s assets on to his heirs.
In any case, our author cautions, careful documentation of digital assets is a vital part of succession planning today. Client information, email addresses, intellectual property, online platforms providing revenue streams, to name only a few, are valuable assets requiring proper identification, cataloging and legal protection.
For more information, please read:
Business Succession Planning In The Internet Age | Forbes