Your Business Succession Plan in California

If your business is past its start-up phase, it’s not too early to think about business succession planning.  You may expect to be continuing in business for decades, but unexpected events can arise, and even if they don’t, a long-established plan is more likely to go smoothly when you eventually leave your business.

Succession planning should in fact be in the back of your mind before you even start your business.  For example, is your name part of your business name?  If so, making that transition may be more difficult down the road.  (Lawyers and other professionals may not have an option, here.)

How you organize your business is also a factor in succession planning.  It is usually easier to transition ownership over time when your business is organized as a corporation or LLC, rather than a sole proprietorship.  Depending on the nature of your business, you may want to bring in outside people to purchase the business, or have a buy-out by your partners or even employees.

If you have partners, it’s generally best to have a mechanism in place in advance for how to value the business when the time comes for a buyout.  When a small business is not on the open market, you can imagine how difficult it can be to agree on a sale price.  You also need to consider where the money will come from to fund a buyout.  Often, life insurance is an integral part of this type of planning.

And of course, business succession planning should be integrated with your estate plan here in California, as both of these work together to make sure that the value you’ve built up in your business is available to benefit your family when you are no longer around.

The issues raised in business succession planning can be complicated, so it is important to get good advice and start getting your plans in place as soon as you can.  Our Santa Clara business lawyers are available to talk about business succession planning; please call if you would like an appointment.