Every client (and lawyer) knows this simple equation: Time = Money.

So to respect your time, this month we are doing a “speed round” of Top 3 with Lindsay.  For today’s post, we’ll focus on the three issues you could consider in connection with succession planning.

• 1. Do you Have a Buy-Sell Agreement in Place? If not, now is the time to consider whether entering into one is right for you and your family.  Buy-sell agreements outline the process for transferring ownership in the event of an owner’s death, disability, retirement or other agreed-upon circumstances.  Having this agreement in place may provide a smoother transition from one generation to the other, reduce the level of uncertainty one party may feel (as to how much they will be paid, what the payment terms will be, etc.) and, importantly, create a sense of security and stability for the business throughout this transition period.
• 2. Family Dynamics: Have you Thought Through These Thorny Issues? If the matriarch or patriarch is stepping away from the business, who will assume the leadership role?  How will that be determined?  How will ownership stakes be divvied up?  How will compensation be decided?  How will a family member’s involvement with the company (or lack thereof) impact their compensation and voting rights?  For family members who are involved in the business, do they have employment agreements in place with a clear outline as to their roles and responsibilities?
• 3. Nothing in Life is Certain, except for Death and Taxes: Careful planning, with tax and financial advisors, can save heartache, headache and thousands if not millions of dollars (depending on the specific circumstances).  The way in which a business – and wealth – is transferred from one generation to another can have significant tax consequences.  Whether it’s estate taxes, gift taxes, capital gains taxes or something else, a savvy, experienced lawyer can help you think through gifting or other strategies to reduce the tax burden associated with the succession.  The time to think about this, and prepare for this, is now.  And if you already have a plan in place, it is imperative to review these plans on a regular basis, especially in light of a new administration, to make sure you are maximizing the benefit of the strategies.

The above are only three of the considerations that you should keep in mind in connection with succession planning.  Keeping a family business within the family is only one possibility. Private or public sale of the business to outsiders, non-family management under family ownership, and adding non-family business partners are just some of the other elements that may play a part in succession planning. Legal counsel experienced in the fields of corporate law, estate planning and tax can help plot a smooth and efficient course for your business’s future.