Madison Business Succession Planning Attorney
How Can I Protect My Business Legacy?
You may be surprised to know that family businesses are not merely an important part of the United States economy, but that these actually serve as the backbone of our lives. Without the family-owned or controlled businesses throughout this country, comprising 90% of all American businesses, it is clear to see that our economy would immediately collapse. In fact, it is estimated that 50% of all wages within the United States, along with about half of the U.S. Gross National Product, all arises from family businesses, which can range from small mom and pop shops to large Fortune 500 corporations.
Unfortunately, however, family-owned businesses have been increasingly found to deteriorate as time progresses. Our Madison business succession planning attorneys at Estate Law Partners, LLC can help provide the counsel you need to survive and thrive even in this difficult economy.
Common Reasons Why Family Businesses Do Not Survive
One shocking fact about family businesses is that even though around 40% are usually going through some form of ownership transferal, only one-third of these attempts actually succeed. Moreover, from these remnants, only 50% will ever make it to a second generational transfer.
There are several factors for this unfortunate percentage, but this primarily happens due to poor management in transferring ownership as each generation struggles to successfully survive the change. Our estate planning lawyers in Madison can help you examine your own family business to see where it is in danger.
Some factors contributing to the success or failure of a family business include:
- The level that the founder has prepared estate planning for the whole family – If owners have not carefully planned out whether their spouse, children, or a non-related employee will run the business, it is very easy for the company to go downhill quickly without the organization of a primary head.
- Estate tax uncertainty – Federal estate taxes are constantly changing, both in the White House and in congress. In addition, several states tend to require their own individual estate taxes, so if you have not planned how to properly liquidate your estate, your family might be forced to give up the business just to pay off debts of estate taxes.
- Carefully coordinated financial and estate plans for future years – In order to make sure all of your business objectives are properly funded, you need to come up with a detailed estate plan which will be able to offer the right amount of liquidity not just for estate taxes but for business debts, and any other needs of your family who are dependent on the business but not necessarily contributing to its activity.
Guiding You Through the Business Succession Planning Process
There are many factors to consider when planning for the succession of the business you've worked so hard to build. We can walk you through all the moving parts and complexities to help ensure that your plan is efficient, effective, and meets your goals.
Some of the important aspects of a succession plan should cover:
- The timeline of your succession, including specific dates that the transfer would take place.
- Who your successors will be, whether it is a family member or trusted employee. We can explore the strengths and drawbacks of your choices.
- Formal procedures, documents, handbooks, and training documentation for your business.
- The value of your business and what it is worth currently
- Contingency plans for any potential scenarios that can occur
What is a Business Buy-Sell Agreement (BSA)?
One key way of prudently preparing for your business transferal is through a BSA, which goes into effect when designated “triggering events” occur, from the business owner’s retirement, onset of disability, or even death. This binding contract is crucial because it allows a smooth transition to the designated new owner or owners of the business, without any chaos or disorganized quarreling over dividing the business amongst multiple parties. Because setting up a BSA can be complicated, get in touch with our Madison business succession planning lawyers for reliable counsel.