What Is Business Succession Planning And Why Is It Important For California Business Owners?

Owners of businesses rely on continuity of management. Big companies make it easy to take this for granted, but they have this covered. For the survival of a business, someone must be in charge and in a position to direct the business. That is what business succession planning assures.

How Can You Identify And Prepare A Successor For Your Business?

A big enough check and an exit would be plenty fine for most people. But if that's not the case, you know whether someone is capable to succeed to the management by knowing that person very well, often from working together. However, candidates should also come from the outside, especially to provide additional skills, then to prepare that person to be your successor, you need to test them, you need to train them, you need to observe them and work with them until you're satisfied they're ready.

What Legal Documents Are Essential In A Business Succession Plan?

They include everything from articles to bylaws, operating agreements, shareholder agreements, buy sells, redemptions, cross purchases, insurance contracts of all kinds, employee benefit plans of all kinds, purchase and sale agreements, consulting agreements, licenses. In other words, everything can be utilized in a succession plan.

How Can You Address Potential Family Conflicts In Succession Planning?

First, we address the natural desire of any family to maintain confidentiality while they work out their differences and hopefully come to a fair conclusion. We make every effort to draft the documents with terms that promote amicable negotiated settlement and minimize the areas for argument in the first place.

What Are The Benefits Of Involving An Attorney In Your Succession Planning Process?

I find it's been super helpful because attorneys tend to kick the tires, they'll look under the hood. An estate plan is a lot less beneficial if any of the key documents are lost or misplaced or if there's an outdated trust and a change in law can wreak havoc so attorney involvement could be on a regular basis.

How Often Should You Review And Update Your Business Succession Plan?

You should only update it when you absolutely have to, but check on that twice a year.

Can You Describe A Memorable Case Where A Business Owner Did Not Have A Succession Plan In Place And It Caused A Major Issue For The Business? How Could Their Enterprise Have Been Saved With Proper Planning? 

Certainly. Well, that would be the story of Dick Pick. Dick Pick created a computer operating system before MSDOS. He was riding on top of the world. He was with a company by the name of a Micro Data and they named the operating system after him, Dick Operating System. He became very wealthy, but died young. He was only 54 years old when he died from complications of a stroke very unexpectedly. He did not have even a will in place and his probate lasted for years, many years, almost a decade.

He had many parties contesting many different wills. He was the majority owner of a company and the company was only able to fetch pennies on the dollar. I worked with a group who was trying to buy out the assets.

What would've happened had this very intelligent person had a will? That would've been a good start, but it would've left it in a probate with fewer questions. What if he had a trust? That would be better, he could have avoided the probate. Maybe I'm getting ahead of myself, but it could have been a far different situation with just some forethought and it's a very, very disastrous situation otherwise.

For more information on Planning For The Future, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling 949-480-1005 today.