Business Succession Planning
Monday, December 26, 2016
What are the necessary steps in buying an existing business?
Many entrepreneurs feel that there is less risk involved in buying an existing business than in starting a new one. Still, it is imperative that you investigate the proposition thoroughly before taking the plunge. Having an experienced, skillful business attorney is essential.
Read more . . .
Thursday, June 16, 2016
How do family relationships get in the way of business succession?
Business succession is normally designed to keep the family business in the family. Apart from having the next generation profit from the hard work and visions of the founder(s), there is an anticipation of leaving a proud legacy behind. Unfortunately, not all business successions work well. In some cases, they cause estrangements among family members; in others they result in the dissolution of the business itself.
In order for a business succession to proceed smoothly, it is essential to engage the services of a Read more . . .
Monday, May 16, 2016
How will I know if I'm choosing the right attorney to help me purchase a small business?
Which lawyer you choose when purchasing a business is important since the experience, knowledge and negotiation skills of your attorney can have a major effect on whether your purchase is successful or not. Unfortunately, the average person chooses a lawyer too quickly, without sufficient investigation into the reputation of the individual attorney or the law firm he or she works for.
Necessary Steps To Assess Your Lawyer's Qualifications
In order to ensure that you are hiring a skilled and reputable attorney, you should:
Interview the Lawyer -- During the original meeting, remember that you are "shopping" for the best fit, legally and personally. Make sure the attorney you're interviewing is experienced with small business sales and acquisitions. An excellent personal injury or criminal attorney who dabbles in business purchases would not be a good choice.
Read more . . .
Thursday, February 18, 2016
What are the reasons to have a business succession plan?
Anyone who has raised a business from the ground up understands the importance of keeping it in safe – and competent – hands, which is precisely why so many small business owners fear the day they must ultimately pass the reins to their successor. However, as today’s story points out, holding on to control for too long can ultimately result in an unceremonious ouster by the governing board – or, worse, an adversarial takeover by concerned family members via a guardianship petition.
In neighboring California, media mogul Sumner Redstone has been at the helm of Viacom since the mid-1980’s – followed by a takeover of CBS in 2000, when he was already approaching 80 years old. Now, the 92-year old is facing a takeover of his own as loved ones recently filed a petition challenging Redstone’s mental capacity, describing him as a “living ghost” and urging the court to appoint a guardian over Redstone to ensure he did not harm himself physically or financially.
In the wake of this filing, executives at both CBS and Viacom made the difficult, awkward, and necessary decision to essentially force Redstone out of the control booth, resulting in a gentleman’s agreement between Redstone and the respective CEO’s of both companies. As a result, Redstone agreed to step down, allowing Les Moonves and Phillippe Dauman to assume the roles of executive chairmen of CBS and Viacom, respectively.
In the case of Mr. Redstone, increasing shareholder pressure and the threat of humiliating mental competency litigation ultimately triggered a rational response by the ailing chairman – who had once proclaimed he did not need to succession plan as he was going to live forever. In reality, however, implementing a proper plan for the transition of a business is an essential part of running a successful operation – and should not be left to the last minute when competency is questionable.
If you need help with business succession planning or have any questions regarding establishing an estate plan in Nevada, you should engage the services of a qualified estate planning attorney.
Sunday, December 13, 2015
There are a multitude of reasons why an otherwise savvy business owner may procrastinate when it comes to implementing a succession plan – particularly if the next-in-line are also next-of-kin. For one, the conversation could jumpstart underlying issues between family members, especially if not all are interested in pursuing the family business. Secondly, it forces the current owners to face the inevitable reality that, at some point, they may be unable to continue at the helm of a company they’ve worked their entire lives to build. However, succession planning is an essential component of running a successful operation – and unreasonable delays could lead to unthinkable disaster.
Too often, business owners treat a succession plan as emergency back-up protocol – laying out what will happen in the event of a sudden death or incapacity. However, succession planning need not be so abrupt, and can take a more transitional approach. For starters, it may take a while for the next generation – be it children or simply new hires – to get acclimated to the company and its structure. In many succession plans, owners lay out a three-, five- or even ten-year transition plan from the current leaders to the up-and-comers.
Notwithstanding the above, succession planning should also definitely include provisions for how the company will continue in the event of a catastrophe, sudden illness, or death in the leadership structure. By planning ahead for life’s inevitable curveballs, business owners can protect against losses that often occur when disorganization occurs on the executive tier, as well as ensure vice presidents and officers are aware of their duties should the need to step in arise.
Lastly, business succession planning is a way to invigorate the next generation as they prepare for their opportunity in leadership. By knowing that the company will eventually pass to them, future leaders will have a vested motivation to learn as much as possible about the world of corporate governance – which is always a sound investment.
If you are considering business succession planning
and would like to discuss your options with a reputable attorney, please contact the Stone Law Offices today: 877-800-3424.
Saturday, November 21, 2015
I have worked hard to establish my own business. How can I pass it on to my loved ones?Succession planning
for a family business can be a tricky proposition. What happens if the next generation just isn’t that interested in running the business? What if there is a difficult relationship among the family members who will all be involved in the business? How can something be passed on to members of the family who do want to be a part of the business while circumventing the family members who are reluctant to participate? How can the business owner manage these problems?
Perhaps one of the more obvious ways business owners can deal with these problems is that they can pick and choose for themselves and dictate the plan for the future. But isn’t there a better way? Suppose the next generation is actively consulted and individual preferences are taken into account when it came to passing things on? This approach might put the success of future family relationships and business relationships on equal footing.
In such a situation, the business owner might find that the next generation shares his or her vision for the future of the company. Even if this is not the case, it doesn’t mean that all is lost. Certain members of the next generation may have important things to add to the discussion even if they have differing views. In such instances, it can benefit all parties if the business is split into different units, or if certain members of the next generation are bought out by other members. Such a result may be the “Plan B” for current ownership, but may be best for the future of the company. It also may be best for the future of the family, because business relationships can run the risk of tearing families apart. In the interest of maintaining a successful business enterprise and keeping the family peace, instead of dictating the future to the next generation, it may be advantageous to let the next generation be a part of the planning process.An experienced business planning attorney
can help you and your business navigate the passing of your business successfully to the next generation.
Wednesday, June 10, 2015
I am in my 60’s and spent a lifetime building a successful business. What pitfalls should I look to avoid in estate and succession planning?
According to statistics, family-owned businesses account for 78 percent of all job creation, 60 percent of the nation’s employment, and a staggering one half of the nation’s entire gross domestic product. For small business owners, relinquishing or expanding control of the enterprise can be an unnerving thought – but one worth having. The following are five general issues to consider when thinking about family business succession and estate planning:
#5: Management Transition: Don’t panic – management transition does not necessarily mean giving up ownership of the business outright. Instead, this concept refers to the change in responsibility over the day-to-day operations, which may be a welcome adjustment after decades of 80-hour work weeks!
#4: Considering a Buy-Sell Agreement: A buy-sell agreement is a contract entered into between multiple owners of a company. If this applies to your structure, this agreement coupled with a value-congruent life insurance policy can help plan for the major triggering events often contemplated, including death, disability, or divorce.
#3: Reducing Tax Liability & Liquidity: Estate tax + illiquidity = nightmare. In other words, a highly-leveraged company or one without much cash on hand could be forced into a fire sale to reduce estate tax exposure in the event of the sudden death of the owner(s). Proper pre-planning with an attorney and/or tax professional can help avoid this disastrous result and keep the family business where it belongs: in the family.
#2: Ownership Changeover: A comprehensive succession plan must include provisions for the change of ownership. As difficult as it may be for a founding owner to relinquish the reins, it is vital to ensure that in the event of an unexpected death or disability, the plans moving forward are clear and concise. Otherwise, turmoil, conflict and litigation will inevitably ensue.
#1: Integration of Personal and Business Estate Planning: For small business owners, the personal and business estate plans should not only refer to one another, but must be consistent and not contradictory. Too often, testators leave their entire estate to one child, only to leave the business to another child in a separate succession plan. This conflict will inevitably invite confusion, and potential hostility.
If you are one of the millions of Americans owning a small business, please contact Las Vegas business succession planning attorneys at the Stone Law Offices today: 877-905-0890.
Thursday, February 19, 2015
What is a buy-sell agreement?
If you are starting up a business, you will be starting it with other people as partners or shareholders (unless you are a sole proprietor/sole owner). Starting a business is exciting. When you are working with others for the same goal, there can be a real team atmosphere, with everyone pulling for each other and pitching in.
Unfortunately, for too many startups, that team atmosphere can easily break down over time. Many partnerships and closely held corporations break up due to disagreements, retirement, the disability or death of a party, or perhaps a party has just lost interest and wants to do something else.
Buy-sell agreements are valuable for any type of business. If there is irreconcilable fighting by family members, co-owners or spouses, this kind of agreement can provide a means for one side to buy the other side's interest in the business and make a clean break. This can keep the business going with its goodwill and operations intact.
Buy-sell agreements come with many options,
• A cross purchase happens when one partner or shareholder sells to another.
• A redemption agreement involves the business making the purchase and the cost is not born by the individual owners.
• In the case of a party dying, life insurance proceeds could be used to buy out the estate’s share of the business.
• The price could be fixed, decided by an appraisal or by an agreed-upon formula.
• The price could be paid in cash or in installments over time.
• Different terms could cover different events (one price and terms for retirement, others for disability or death).
Putting together a buy-sell agreement forces the parties to plan ahead and consider the "what ifs" should there be an unfortunate turn of events. No one can foresee the future, but with a buy-sell agreement you can plan for an uncertain future and give your business a greater chance of long-term success.
Even if you already have a buy-sell agreement, it is important to review it periodically to make sure that it still works in the manner you remember. Over time and as the business grows, it may be necessary to amend the terms or add new language to reflect the current state of the business and relationship between the owners. In short, it is recommended that you perform a "fire drill" to test the provisions in your existing buy-sell agreement so that you are certain that it will accomplish your goals if / when the "real thing" happens.
To learn how a buy-sell agreement can work for your business, call Las Vegas, Nevada business law attorney Craig Stone at (877)905-0890. He has more than 20 years of experience advising clients who are buying a business, selling a business, and handling every phase of business planning in between.
Monday, February 2, 2015
What Estate Planning Issues Do Business Owners Face?
Business owners must consider unique issues when putting together an estate plan. Thinking through these issues and drafting the right documents, such as a will or trust, can benefit both your family and your business.
Estate planning may lower the taxes your heirs will need to pay and give you some control over how your assets are distributed after your death. Without proper precautions, your ownership interest may go to your next of kin (who you may not want to own your business) and be tied up in probate court, which may seriously interrupt its operation and result in lost customers, revenue and value.
If you co-own the business with at least one other person, you should have a buy-sell agreement (or “buyout agreement” or “business will”) where co-owners spell out when, how and for how much the ownership interest of one party would transfer to another if a partial owner dies, becomes disabled or simply wants to leave the business.
Make sure the documents creating the business entity are up to date and accurate. Many business owners will have partnership or incorporation documents created when the business starts, then fail to update them or make the necessary, ongoing filings. If this is true in your case, outdated documents can complicate transferring ownership.
If you are the sole proprietor, that can have tax implications for your heirs, so you may want to consider making a change to a different form of business (such as a corporation).
• If you are the sole proprietor, your company’s assets are owned by you as far as determining if any federal estate tax is due.
• If your business has significant assets (real estate, heavy equipment or intellectual property), your heirs may get a hefty tax bill and quickly need to sell assets to pay it.
There are also some practical problems when a business owner passes away without planning ahead:
• Does anyone else have keys or codes allowing access to your business?
• Are computer passwords written down in an accessible place?
• Is anyone other than you authorized to write checks for the business or enter into contracts on your company’s behalf?
• Is there a list of contact information for key people, managers, accountants, lawyers?
• Are contracts binding your company in one, accessible place?
These concerns may seem daunting, but we are here to help. The Stone Law Offices has extensive experience in helping clients address both business law and estate planning issues. We can help you put together plans so both your family and your business will benefit. To discuss your plans and needs, call the Las Vegas, Nevada business succession planning attorney Craig Stone today at (877) 905-0890.
S. Craig Stone II of Stone Law Offices, Ltd. serves clients throughout Clark County, Southern NV, Las Vegas, Henderson, Boulder City, North Las Vegas, Summerlin, Carson City, Reno, Washoe County, and Nye County. Also serving clients with asset protection nationwide.