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Business Succession Planning

Business Succession Planning

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Published by Raymond German
Whether your business is a sole proprietorship or a partnership, a well though-out business succession plan is necessary to ensure the survival of your business. Of course only you and your estate planning attorney can create your own individual business succession plan; however, a basic understanding of the subject matter is a great place for you to start if you have yet to complete a plan.
Whether your business is a sole proprietorship or a partnership, a well though-out business succession plan is necessary to ensure the survival of your business. Of course only you and your estate planning attorney can create your own individual business succession plan; however, a basic understanding of the subject matter is a great place for you to start if you have yet to complete a plan.

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Categories:Business/Law
Published by: Raymond German on Jun 12, 2013
Copyright:Attribution Non-commercial

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06/12/2013

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Why awell thought-out businesssuccession planis necessary to ensurethe survival of your business
 
Raymond J. German www.GermanLawGroup.com
2
 
 
If you are a successful business owner then you haveundoubtedly put in thousands of hours and a significantamount of your own money into making the business asuccess. What happens to your business though if something happens to you? Whether your business is asole proprietorship or a partnership, a well though-outbusiness succession plan is necessary to ensure thesurvival of your business. Of course only you and yourestate planning attorney can create your own individualbusiness succession plan; however, a basicunderstanding of the subject matter is a great place foryou to start if you have yet to complete a plan.
Why Do I Need a Succession Plan?
To understand why you need a business successionplan, consider what would happen without one undereither of these scenarios.1.
 
You and your partner Joe have a successfulbusiness formed by a formal partnershipagreement. You are both young and the thoughtof either one dying is not something you worryabout; however, Joe is unexpectedly killed in atragic car accident. Joe left behind a Last Will andTestament that gave everything to his young wife
Sally. Legally, Sally now owns Joe’s share in your
business yet Sally knows nothing about thebusiness and has no interest in learning. Sinceyou invested your life savings in the business, you
don’t have the cash to buy out Joe’s interest in
the business.
2.
 
You own a successful sole proprietorship andhave hope that one day your children will takeover the family business. Although you havediscussed the possibility with all three of yourchildren, a legal succession plan has never been
 
Whether your business is asole proprietorship or apartnership, a well though-out business successionplan is necessary to ensurethe survival of yourbusiness.
 
 
Raymond J. German www.GermanLawGroup.com
3
 
created. A tragic accident leaves youincapacitated and unable to run your business.Legally, none of your children have the authorityto run the business either and it could takemonths to go through the court system to get theauthority after the fact. Without a businesssuccession plan, your business would essentiallycome to a grinding halt and might never recover.
 
Deciding on a Successor
Once you have realized the need for a businesssuccession plan, the first step is to decide who will beyour successor. The legal structure of your business isimportant when making this decision. For example, if your business is a partnership, then you will likely wantto consider your partners first. On the other hand, if your business is a sole proprietorship, you may decideto leave it to a family member, assistant in the business,or sell the business outright upon your death. Yourchoice of successor will determine how to legallytransfer your interest.But first, some notes about choosing a family memberas successor. While many business owners dream of passing on a business to the next generation, it iscritical to ask three important questions before makingthat choice. First, does your intended family memberactually want the business? Second, is he/she capableof running the business? Finally, how much familyconflict will your choice cause?
Gifting the Business in Your Last Will andTestament
Your interest in a business, whether it be a soleproprietorship, partnership, or corporation, is an estateasset. As such, it may be able to be gifted to someone
 
 
The legal structure of yourbusiness is important when deciding who will beyour successor.
 

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