Business Succession Planning


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Putting a Succession Plan in Place: Ensuring Business Continuity and Cementing a Legacy

Are you considering business succession planning? Trust Perigon Legal Services for a smooth process. Connect with us for guidance tailored to your needs.

Author: Stan Faulkner, Founder, Perigon Legal Services, LLC

Mr. Faulkner is an experienced counselor and litigator with 15 years of experience, having held bar licenses in four states (Mo, Il, Ct and Ga). Stan Faulkner uses this experience and focuses his skills in the pursuit of assisting individuals in probate (trust and estate) matters, guardianships and conservatorships, estate planning, business disputes and contract disputes. Published on January 04, 2023.

Do you own, co-own, or manage a business? A business owner or partner’s untimely death or retirement can create chaos when there’s no succession plan in place. Fortunately, you can use estate planning tools to protect the company’s future.

Through business succession planning, the company can continue to grow while preserving harmony, reducing or eliminating income and estate taxes, and retaining control over its affairs. For family corporations, business succession planning could preserve family wealth and promote peace and harmony.

Our lawyers at Perigon Legal Services have experience and comprehensive knowledge of estate law and succession planning. We have helped companies across Georgia ensure a smooth leadership transition following a death or retirement. Learn more about business succession plans in this comprehensive guide.


What Is Business Succession Planning?


It is the process of putting in place a succession plan that determines who will take over the company and what type of business entity those who take over will run.

Succession planning also includes selecting crucial positions in the organization and establishing a talent pipeline. Employees (or family members, in the case of family corporations) are groomed to fill vacancies in the company as others retire or move on. The successor must have adequate knowledge and abilities to cover the vacancy while waiting for the permanent placement.

Having a will can affect your business and may complicate matters, especially in the absence of a dedicated business succession plan. An estate planning attorney can advise you on ways to avoid probate, minimize taxes, and preserve wealth for your family’s future.

Identifying Roles and Potential Successors

One of the most crucial steps in the business succession planning process is identifying potential successors.

There are different ways to find the right people for the job. Leaders can nominate key employees, or they can be invited to express their interest. Maintaining transparency in the selection process is important to cultivate equity and trust.

The company should establish qualifications for potential replacements, such as:

  • Consistent high performance

  • Has a measurable positive effect on the business

  • Respected by colleagues, customers, and managers

  • Adapted to the company culture

  • Exemplifies the company’s values

  • Willing to innovate and improve their functional area

Many companies that have failed to create a succession plan ended up selling their business at a loss. Get advice from a seasoned estate planning attorney for the proper guidance.

Common Challenges and Solutions in Succession Planning

Navigating Family Dynamics and Business Interests

Family businesses experience tension due to future leaders’ eagerness to take control and the senior leaders’ unwillingness to let go.

Here are some strategies to help lead to a successful transition:

  • Find the balance between collaboration and control. There has to be a timeline for the assumption of responsibilities. Who has what authority to make decisions also needs to be determined.
  • Be open to the next generation’s point of view. Learn to listen to their ideas and determine how they align with the company’s goals and aspirations.
  • Define the family’s standard for readiness when it comes to taking leadership roles.

Addressing Legal and Tax Implications of Business Succession

An owner can envision the future of his business in different ways. He can:

  • Transfer his shares to his partner or senior leaders.
  • Pass on the leadership role to family members.
  • Sell the business if no one is fit for the role.

In any case, taxes play an important role in developing the business succession plan. The two parties of any business transaction must take into consideration state estate tax, income tax, and capital gains tax. Your estate tax planning lawyer will provide the needed guidance to minimize your tax liability.

Strategies for Effective Succession Planning

Developing a Succession Plan

Filling critical vacancies can be costly, time-consuming, and difficult. Follow these five steps in creating a business succession plan.

  1. Identify key positions.
  2. Identify potential replacements.
  3. Determine the timeline for when the next leaders can step up.
  4. Determine the successor’s development needs.
  5. Create a training and supervision plan.

Implementing and Reviewing the Plan

Review the company’s efforts and plans every year to ensure they still reflect your desires and can achieve the established goals.

Consider the following:

  1. The number of candidates fully prepared to take on leadership positions
  2. Changes in the tools or processes that the company uses to develop employees
  3. Overall performance of the company before and after the succession planning strategy was implemented

The Role of Legal Support in Succession Planning

Proper succession planning is tantamount to your company’s future. It’s strongly recommended to hire someone with the required legal knowledge to help you create a successful succession plan. Here are a few ways in which an estate planning attorney can help:

  • Legal compliance: Legal professionals ensure that the succession plan aligns with relevant laws and regulations. They help navigate employment laws, corporate governance requirements, and any industry-specific regulations to avoid legal complications.

  • Documents and contracts: An attorney can assist in drafting and reviewing succession planning documents, such as wills, trusts, and employment contracts. Clear and legally sound documentation is essential for a seamless transition.

  • Tax implications: Succession planning often involves considerations of tax implications. An estate planning lawyer can provide advice on minimizing tax liabilities, understanding inheritance tax, and structuring the plan to optimize financial outcomes.

  • Family business dynamics: In the case of family businesses, legal support helps navigate complex family dynamics. They may assist in creating agreements, such as shareholder agreements, to address potential conflicts and ensure a fair distribution of assets.

  • Dispute resolution: An estate planning attorney is crucial in addressing potential disputes that may arise during succession. They provide mechanisms for dispute resolution, such as arbitration or mediation, minimizing the need for costly and time-consuming litigation.

Perigon Legal Services Can Help

Effective succession planning has many benefits for large, medium, or small business owners. It could ensure business continuity and prosperity, especially during times of change and shifts in leadership. Even if there’s no immediate successor identified, the process could help determine the required transfer of institutional knowledge, skills, and training for a future candidate and even for future roles.

Our team at Perigon Legal Services has extensive experience in estate planning and business succession planning for businesses of varying sizes and types. With our dedicated legal support, you can make smart choices for the future of your company while also preserving wealth and legacy. Schedule a free consultation today, and let’s start planning for the future.

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