What will happen if you or one of the key owners or principals of your business should die, become disabled, or retire? It is not a question of if one of these events will occur, but when.

Often overlooked by the individuals involved in the establishment of a new business is the business succession plan. Statistics indicate that over 60% of privately held businesses lack any form of succession plan. Whether this is due to a natural tendency to focus on what is needed to make the new business successful or a short-sighted decision not to incur the expense, the failure to include a business succession plan can have disastrous ramifications.

The events and changes in circumstances that affect the business or the personal goals of business owners are often unpredictable. Nevertheless, proper advanced planning will enable the business owners to deal with these eventualities without the acrimony and expense of litigation. Some of the common events or factors that can be addressed in a business succession plan include:

• Death of an owner. Without a plan, you may end up with the spouse of your deceased business partner as your new business partner.

• A non-performing business partner. A plan can provide a means for eliminating the owner who drains the company of funds without contributing to the company's success.

• Retirement or burnout. When one owner wants to sell his or her interest in the business for any reason, a plan can ensure that the other owners have the opportunity to obtain the interest of the retiring or selling owner.

The succession plan can also define the method to be used in valuing the business at the time an interest in the business is to be transferred. It is critical that the method selected to establish the value of the business be realistic for both the selling owner and the remaining owners who desire to acquire the selling owner's interest. 

In addition, we at Quinlivan Wexler LLP can assist in the development of a plan for funding the buyout of the deceased, disabled, or departing owner through the use of insurance trusts, key executive insurance, or other appropriate means.

In the case of family owned and operated businesses, we can help our clients address the often difficult and sensitive issues that arise in passing the ownership to children or other family members. A realistic assessment of the strengths and talents as well as of the weaknesses of those who may be in line to take over the business can avoid disputes and hard feelings that sometimes destroy a family. By addressing these potential problems early, a smooth transition is much more likely.

Quinlivan Wexler LLP has the experience and knowledge required to lead our clients through the succession planning process. We will take the time necessary to fully explore options with our clients in order to achieve a plan that best suits the needs and goals of the business and the individual owners.

In addition, our lawyers have the expertise to assist our business owner clients in developing a personal estate plan that will protect the assets for which they have worked so hard.