11 Reasons You Should Consult a Lawyer Before Drafting a Business Succession Plan

It is observed that not all businesses commonly create a succession plan which decides what will be the business’s fate if the owner retires, becomes disabled, or dies. 

Many of them term it unnecessary, not realizing how perturbing leaving the scene without planning will be for their loved ones and their work. 

The “Power of Planning” study conducted by Wilmington’s trust showed that 58% of small businesses do not have a business succession plan in place.

To ensure that your business will progress even after you leave the scene, a legally drafted business succession plan is imperative. A properly formulated plan will be an initiative towards helping your business continue for generations.

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If you want to be confident that your business will generate income after you retire, or is passed down to your heirs after you, consider negotiating your succession plans with a commercial attorney.

According to Nationwide’s latest Small Business Survey, only 48% of businesses that drafted a succession plan consulted a lawyer.

Experts, however, highly recommend lawyer consultation. President of Nationwide Financial, Kirt Walker, believes that the most successful business succession plans involve an attorney from the beginning of the process.

Read on to find out why consulting a lawyer will benefit you with the business succession.

A lawyer who is experienced in succession planning will:

• Give You Practical Succession Advice

Drafting a succession plan is not a small task that would get over with you writing your will in a day. It requires thoughtful analysis, considerable planning, and sound knowledge of how succession works.

Lawyers are equipped with the right knowledge on carrying out such procedures from beginning to end. With their experience, they will provide legal recommendations regarding wealth management to manage your assets proactively, procuring retirement funds, and best practices of succession. He will let you know about the transfer costs, taxes, and other legalities beforehand.

The attorney you choose will help create a comprehensive plan that will cover your objectives. He may suggest changes and advancements in the company structure to avoid possible disputes at the time of succession.

• Make Legally Enforceable Documents According to The State Laws

Every state has its laws regarding succession, and not knowing clearly about them may hinder your succession plan. A lawyer practicing in that particular state will guide you the best about its laws.  

For instance, if a business owner from Texas is looking for a commercial attorney, Plano, Dallas, or Houston have some notable law firms to find experienced lawyers. They are well versed in Texas succession laws.

The attorney will make sure that every document that is prepared regarding the succession is valid and enforceable. 

• Help Reduce Estate Taxes

The accurate plan of succession drafted by a lawyer will save you from estate taxes significantly. 

A lawyer will guide you with tax-saving strategies, such as gifting the property and assets to avoid individual taxes. Saving money on taxes will help you maintain a lifestyle that you wish after retirement. 

• Carry Out Process Seamlessly

Although it sounds simple, completing the task of executing the succession requires a lot of work. Also, the transition could likely take place after an unfortunate event of death or incapacitation.

Without burdening an already worried or grieving family member, the lawyer will efficiently take care of the transition matters. He will conduct the procedure smoothly and handle any issues that hinder the task.

Seeking a lawyer’s opinion would help preserve your interests and keep your business’s worth intact.

• Help You To Determine And Train a Successor

Any plan of succession is useless unless a worthy successor is selected to continue the business efficiently. Consulting a lawyer will help you with the legal angles of this part as well. 

He will help you determine a potential successor and train him accordingly. He will ensure that the successor hones his skills to handle vital responsibilities efficiently and operate your business smoothly when the time comes.

• Calculate Monetary Value Of Your Business

Surprisingly, over 65% of business owners never audited their financial statements, according to EPI’s survey in San Diego.  This means that they don’t have a good idea about the value of their business.

Consulting a lawyer will benefit you in this regard as he will formulate your business’s monetary value according to its capital structure, market value, and future earnings prospects.

Business valuation methods are quite exhaustive, therefore relying on a professional will save you from the hassle and get the work done much more accurately.

• Provide a Sense Of Security To Surviving Heirs

Without a legally formatted plan of succession, there is always a fear of the business falling apart after the owner’s unavailability. But if you hire a lawyer to handle the succession process, it will give a much-needed sense of security to the heirs. It ensures that all the hard-earned success of the business owner will not go in vain.

• Facilitate Smooth Transfer Of Assets and Authority

An attorney cannot only develop a well-structured succession plan, but he is also able to implement it smoothly. This means that your business operations won’t get affected in case of sudden unfortunate happening or retirement, and a sleek transition of authority will take place because of the lawyer.

• Prepare To Handle Unexpected Events

Even with thoughtful planning, conflicts among heirs, legal hurdles, unexpected delays, or any other problems may come up during the succession. A lawyer is already prepared to address such issues and resolve them as soon as possible.

• Assist in Stating A Role For Every Heir

Designating roles to each heir is one of the most critical steps while planning a succession strategy. Assisted by your lawyer, you can decide the best role that fits each heir beforehand. You and your attorney will carefully assess each heir’s weaknesses and qualities and then come up with the right decision.

Once implemented, this strategy will sort most of the succession issues and ensure the business’s smooth running as per your desires after you leave the scene. Plus, if your heirs know beforehand what role they will play, it will motivate them to develop their careers accordingly.

• Carry Out Dissolution Of Business If Partnership Ends 

If business partners no longer wish to work together, a dissolution will be carried out with a lawyer’s help. He will create an exit strategy that works in favor of all partners. 

According to a particular situation, a lawyer will advise on the process of dissolution and will handle the distribution of assets, filing tax returns, and other laws and regulations.

Summing Up

The earlier you start succession planning with a trusted attorney, the better it will be for your family and business. It will make sure that your hard work and legacy are not left on chance, and proper documentation is there to make matters easy for your heirs. 

Moreover, there will be a timetable for succession to clarify when the process of succession would occur.

It will be one of your life’s wisest decisions to add legal aid to your succession planning and make a comprehensive plan with him.