KY Business Succession Planning Attorneys
Some people are better at planning than others. Being able to weigh the pros and cons in advance – in fact, even being aware that it’s a good idea to think ahead and form a strategy – is a very valuable skill to have.
Making a succession plan for a business is necessary to protect against the financial risk of what would happen in the event of the owner’s retirement, disability, or premature death. Without an exit arrangement, the business may be lost any number of ways, including to estate taxes, to a lack of trained management, to sibling rivalry, or to squabbles between heirs and employees. Even a business that is not somehow lost is still subject to outside forces – an owner without a transition plan has no say in what happens. You’ve put your heart, sweat, and resources into building your business. For it to prosper without you, take the time now to set some goals in order to achieve the best transaction possible when your active role in the business is at an end.
When you’re ready to discuss developing a succession plan for your business, the Lexington, Kentucky LLC lawyers at Bunch & Brock are here for you. We understand that everyone has different goals, and we create personalized, comprehensive plans tailored to each client’s unique circumstances. We work hard to ensure that the finished product offers the peace of mind that you’ve made good decisions and done right by yourself, your loved ones, and your business.
Put our experience to work for you. Contact us today by calling 859-254-5522 or filling out this online form.
Increasingly, businesses in certain service-oriented industries are finding that a succession plan is a necessity for keeping existing clients, attracting new ones, and even motivating employees, because it reassures them that they won’t suddenly be left scrambling if something happens to the owner. Time is one of those things we all think we have plenty of. Not knowing the future has scuttled many people’s aspirations. Accepting the reality that one day, for any number of reasons, you will no longer lead your business is an important first step to taking some control over the unknown. Envisioning that future will help determine which succession options are the best for meeting your transition objectives.
To that end, some questions to consider include these:
- Is the next generation actively educated on the rights and responsibilities of ownership in the family business?
- Is there a process to assess the qualifications of family members to work in the business? How are conflicts handled?
- Do you want to transfer your business to the next generation, or do you want to sell it and transfer some or all of the proceeds to your heirs?
- If you choose to sell your business, do you want it to be to key people inside the business or to outsiders?
Succession plans can specify the time period for transition as well as the way that ownership interests should be transitioned, such as through stock transfer, buyout, or earn-out. An owner can even sell the business in incremental pieces to allow time to evaluate the buyer’s performance.
An ideal succession plan helps transition a business to the next set of leaders and ensures that the owner (or the owner’s heirs) will receive fair value for his or her share. Valuations are based on a number of factors, including the worth of hard assets and the ongoing cash flow of a business.
Because so many small businesses are organized more like a job than an investment, determining the value of an owner’s interest can be very complicated. The most frequently used methods are:
- By appraisal
- As agreed upon annually
- Book value
- A multiple of annual earnings
- Replacement cost of hard assets.
“Appraisal” and “as agreed upon annually” generally help lower the possibility of conflict if a sale is necessary. The last three methods have their advantages, but are risky because they are easier to manipulate.
Lack of business succession planning can have far-reaching consequences. With over 35 years of experience in our community, the Fayette County business succession planning lawyers at Bunch & Brock are committed to providing each of our clients with a high level of personal service. We understand that each plan must be as unique as the company it serves and we have worked hard to protect the best interests of hundreds of business clients faced with the questions that concern you now. We will guide, inform, and educate you on the benefits and disadvantages of all of the available options so that you can be confident in the decisions that are made. We welcome the opportunity to help you reach your business transition goals. To schedule an initial consultation, please call 859-254-5522 or fill out this online form.