Any company will have trouble enduring without a captain at the wheel, whether this be an owner, executive, or other decision maker. Businesses are often scrambling when a key member is suddenly unable to perform his or her duties because of illness, retirement, or death.
In these cases, the company has to recover any lost assets and look for a replacement. These transitions can go smoother for both small businesses and large corporations alike with Utah succession planning.
Not Having a Plan
If an important decision maker in a company does not have a succession plan, either his or her stake is passed onto relatives or it is absorbed by the other shareholders. Sometimes, it is a combination of both.
In a business that is family-owned, not having a succession plan could mean disputes among family siblings or other family members. This may occur when relatives who are more active in the family business feel they are owed more than those who are less engaged.
Without succession planning in larger corporations, disputes may occur among shareholders. Clients and employees may leave out of a fear of insecurity, and interim replacements might not be experienced enough to lead the company through a fragile time. All of these could mean a loss of assets.
Having a Plan
Succession planning with experienced attorneys can help the transition process go smoothly. During the planning stage, it is decided what the goals for the company are, and shareholders, employees, coworkers, and family members are consulted. The plan can be customized to fit any business model.
In general, succession plans include retention or buy-sell retention:
• Retention – This keeps the business or shares of the business in the family. Spouses, children or other family members maintain control of the assets.
• Buy-sell retention – Interested parties specified in the succession plan are offered the right of first refusal. They can accept or reject the shares before the shares are offered to others outside the company. That way other shareholders or employees are offered a bigger stake in the company. During succession planning, the value of the shares are determined and can be based on full market value or appraisals.
In case of the unexpected, succession plans offer procedures for companies to follow. They also help members of the business name a successor, someone who will be able to lead the company in a time of uncertainty and guard the company from further loss.
Succession plans can include pensions and retirement funds and even transfer the decision maker’s assets into a trust to be paid out to relatives. In some cases, assets can be divided among employees. Sometimes, it is best to sell the company.
A knowledgeable Utah business and estate planning attorney can help you understand all of the factors to consider in succession planning.
Wilson Law Offices- 1555 E. Stratford Ave., #100,
Salt Lake City, UT 84106 - 801-467-5800