FAQ’s for Business Attorneys

FAQ’s for business attorneys can vary in complexity. Here are some common questions.

What are the legal requirements for forming a business?

  • Business Structure: The type of business structure you choose (sole proprietorship, partnership, LLC, corporation, etc.) will significantly impact the legal requirements you need to fulfill. Consulting with a business attorney in your area is best to get a full understanding of what business structure may be best for your situation.
  • Location: State and local regulations can differ. Be sure to consult with a business attorney in your area.

Do business owners need estate planning?

Yes, business owners need estate planning. There are different ways to include your business in your estate plan. Aside from a business succession plan, your estate plan is a great tool to protect all you’ve worked so hard for.

What is business succession planning?

Business succession planning is the process of preparing for a transfer of the business to another person (often a younger family member) or a business entity. This should be one of the FAQ’s for Business Attorneys that should be handled when deciding who to hire as your attorney. The main objective of the business succession planning is to transfer the business to a third party in a way that maintains or even increases the valuation of the business, minimizes tax liability, and minimizes the disruption of the business operations.

How much does business succession planning cost?

The cost of business succession planning varies depending on the size of your business and the route you want to take in transferring ownership. The cost of having a business succession plan far outweighs the risks on your business if you don’t have one.

Why do businesses do succession planning?

Businesses have succession plans to prepare for a transfer of ownership of the business to another person when it becomes necessary. We all move on at some point, even business owners. Whether it’s retirement, a career change, an emergency, death, or whatever reason, it’s inevitable that at some point a business owner will leave the business. A succession plan ensures a smooth transfer of ownership that keeps operations running without any issues. Having a succession plan in place also helps mitigate tax liabilities and helps the valuation of the business.

What is succession planning explained with an example?

A business succession plan is the plan you have for transferring ownership of your company once you inevitably leave. This can be done in a variety of ways. Say you are the sole owner of your business. You can choose to either pass the business down to someone, sell the business to someone, or even close the business altogether. If you have partial ownership in a company, a succession plan dictates how your percentage of the company would be transferred upon your exit.

What is the succession planning process?

There are many different strategies and options for succession planning. The following four general steps for developing a succession plan provide a good road map for the process:

Choose Your Business Successor – If you don’t have a family member who is able and willing to take the reins of your business.  You may start by looking within the business organization, examining current senior management who may have the right leadership skills.  In some circumstances, current employees of the business may be willing to buy-out the business from the owners.  Privately-held family businesses will benefit from the engagement of the third-party consultants, who can provide guidance during such emotional period. This process should begin at least 5-10 years prior to a planned retirement.

Develop a Formal Management Training Program – First, you need to identify some of the most critical functions of the company and have your successor(s) work in each of these areas. It’s not enough for your successors to understand the executive responsibilities, they need to be able to step-in and lead the organization when the time comes.

Establish a Reasonable Timetable – Determine how and when control of the company will be shifted to your successor.  It should be noted that the company’s ownership and management of the business may be transitioned to the successors at different times.

Execute the Succession Plan – If you have made the proper preparations, the execution of the business succession shall be relatively simply process. Businesses whose owners install their successors during their lifetime typically have a much smoother transition and the greater chances to preserve the success of the business for the future generations.

How do you write a business succession plan?

To write a business succession plan, you need to start thinking about your main concerns for your business and what your goals are. With your succession plan you will want to list those clear goals and the structures you have in place to achieve them. Once you have the direction for your business, you’ll want to have a clear standard of operating procedures and how the business is run to stay successful. The main part of succession planning is determining who will take over the business after your departure and what those terms will be. Of course there are many considerations and other factors to consider. Having a professional help you with your succession planning will help to ensure a smooth transition. 

Why is succession planning important for small businesses?

Succession planning is important for small businesses because it’s harder for a small business to continue operating if something were to happen unexpectedly to the owner or if there’s no plan as they are nearing retirement or a leave of absence. By making arrangements early, it will be easier for the business to continue running smoothly. 

How does succession planning help an organization?

Succession planning helps an organization by keeping an organized plan for operating procedures, talent management, and overall continued success of the company if something were to happen to either the owner or any members of the leadership team. 

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