Business Succession Planning and Buy-Sell Agreements
Change is the only constant in life, which is why you should always have the next stage of your business in mind. Succession planning is a crucial step in a business’s lifecycle, and it’s an important part of an individual’s estate planning. You have worked hard to build your business. You should prepare for when it’s time to retire or pass on your legacy. A strategic plan to handover your business protects against a number of challenges and legal issues. Professional advice on business succession planning and buy-sell agreements is critical to ensure the most advantageous and prudent transfer of assets and responsibilities so that your legacy may endure.
Wherever you are in the planning process, working with the right legal team can give you peace of mind and protect the future of your business. When you choose Barney McKenna & Olmstead, know that our advice and strategies come from decades of experience working in Utah, Nevada, Arizona, Washington, and California. Set up a consultation now by calling our southern Utah office at 435-628-1711 or our Mesquite office at 702-346-3100.
Business Succession Planning Issues
There’s a lot to consider as you plan for the next phase of your business. Your financial objectives, who will take your place, and the terms of a sale are key considerations. Working with an experienced business succession planning attorney will provide you the technical advice to understand the many factors that may affect your decisions.
Identifying a successor or multiple successors is a central concern. Perhaps you hope for a chosen family member, trusted employee, or outside party to step into your role. However, actually getting them into that position is a journey that requires clear communication and thorough planning.
A smooth, seamless transition is essential for the sake of your business. If a transition is handled poorly, the business bears the brunt of it. You risk losing essential employees, interrupting day-to-day operations, losing clients, and even losing stock value. A well-structured business succession plan outlines every step of the transition.
Asset preservation is a critical issue in business succession planning. Your company’s intellectual property, valued clients, customer relationships, and contracts must be preserved to avoid loss of value.
Buy-sell agreements are a useful tool in business succession planning. They are legally binding and outline the conditions required for an owner to sell or transfer their share of the business. A comprehensive buy-sell agreement accounts for a range of scenarios, including the retirement of the owner, the death of the owner, or the incapacitation of the owner. If there are multiple owners, a buy-sell agreement prevents one owner from selling their share to another party without the consent of the others who own the business.
Using Buy-Sell Agreements for a Seamless Handover
When you create a buy-sell agreement, it protects the involved parties in several different ways. It ensures that a business continues running smoothly should the owner retire, become disabled, or pass away. Buy-sell agreements can also protect the business’s assets.
There are multiple types of buy-sell agreements. A cross-purchase plan has each of the surviving owners purchase the departing co-owner’s shares, while an entity redemption plan involves the business itself purchasing the owner’s shares. From there, the remaining co-owners distribute the shares amongst themselves. Another option is a one-way buy-sell agreement, which allows a sole owner’s heir, spouse, or chosen employee to purchase the business. There’s always the wait-and-see agreement, which gives the company the first shot at the departing owner’s shares. If the company does not purchase them, the remaining owners have the opportunity to buy them. If they don’t, the company is generally obligated to purchase any remaining shares.
There is no one best arrangement; it all depends on your business structure, how many co-owners there are, and the liquidity of both the business and its owners.
A buy-sell agreement must have several key elements, including a list of the parties involved, triggering events, a valuation of the business, sources of funding, the buy-sell structure, and tax considerations.
Why You Should Choose Barney McKenna & Olmstead for Business Succession Planning
The future of your business rests heavily on how early and how thoroughly you plan. At Barney McKenna & Olmstead, we come up with tailored solutions based on your business’s history, current needs, and future goals. We understand how much is at stake—whether you leave your business via retirement, incapacitation, or death, you want your legacy to continue growing. We’ve helped businesses of all sizes and across all industries navigate difficult transitions and flourish on the other side. By considering the legal, financial, and operational needs of your business, we will work alongside you to craft a plan that lets you look forward to the future.
Wondering What the Next Stage of Your Business Looks Like? Contact Barney McKenna & Olmstead Today
The sooner you begin business succession planning, the smoother your eventual transition will be. Let us use our expertise to guide you and take the stress out of the process of business succession planning. Set up a consultation now by calling us at 435-628-1711 or contacting us online.