A business succession plan is a key component of any asset protection plan. In most cases, a family business constitutes a large percentage of the owners’ assets. Yet a significant number of businesses have absolutely no succession plan in place.
In thirty years of representing family businesses, I have come to understand why succession planning is so difficult. There are many reasons for this but I believe three of the most significant are as follows:
- It is simply difficult for many business owners to imagine that anyone else (including family members) will run their business as well as they do. And they are frequently correct about this! Unfortunately, this is not a good reason for having no succession plan in place. It reminds me of naming guardians for minor children in a Will. Most parents feel that no one would raise their children with the same care and attention that they would; and that is probably correct. It is nevertheless foolish to simply ignore what would happen if both parents died. The same is true in business. Lack of a succession plan can lead to confusion and needless controversy following the death, disabilty or retirement of the owner.
- Many business owners have thought of succession planning, but simply do not know where to start. All that is really required to get started is to contact a professional…either an attorney or business consultant who specializes in this kind of planning. Business succession planning should be a team effort involving a number of professionals. But someone needs to spearhead the effort, and this is frequently the job of an attorney or consultant.
- Finally, I find that in today’s lightning-paced business environment, it is simply hard for business owners to find the time for succession planning. Business owners should realize that developing a succession plan can save huge amounts of time and money in the future. Speaking in business terms, there is generally a huge return on investment. This alone should be an incentive to do some planning.
Business owners today are rightfully concerned about catastrophic lawsuits and other creditor problems. I would guess, however, that more businesses are lost or severely damaged by the lack of a meaningful succession plan than by an unexpected, catastrophic lawsuit. Asset protection in today’s business environment is abouletly critical. And a business succession plan is a key component of asset protection.