Estate And Business Succession Planning
While estate planning is a complex undertaking for anyone, it poses special challenges for business owners. Passing a business from one generation to the next, owners are not simply bequeathing assets and wealth, they are handing over the reins of a livelihood to a new generation of owners. Business owners naturally want to ensure their heirs are positioned for success.
Ensuring A Successful Business Succession
At Wiczer Jacobs LLC, in Northbrook, we are trusted legal allies for business owners. We combine our deep knowledge of business law and estate planning to help business owners achieve their business succession goals.
Crucial elements of a business succession often include:
- Transferring real estate, equipment, customer lists, intellectual property and other business assets among owners and family members
- Establishing a management structure
- Establishing a framework for resolving potential disputes among owners and family members
- Tax planning and estate planning to maximize tax benefits and savings
We can help you through this process by establishing wills, trusts, powers of attorney and other estate planning documents, but this is only the beginning of the process. The estate planning instruments must work in harmony with the overarching goal of setting up your beneficiaries for success in business. Because we practice extensively in both of these areas, we have the experience, knowledge and resources to achieve as seamless of a transition as possible.
Risks Of Not Having A Business Succession Plan In Place
A business succession plan outlines how ownership and leadership transitions will occur when a business owner retires, becomes incapacitated or dies. Failing to have a succession plan can lead to significant risks for the business and its stakeholders. Some of these dangers include:
- Disruption of operations: When a key leader unexpectedly departs, the business can be chaotic. Without a clear plan for who will take over, employees may become uncertain about their roles, leading to decreased morale and productivity. Clients and customers may also lose confidence in the business, which can result in lost revenue and damaged relationships.
- Loss of business value: A business with a well-defined succession plan is more likely to retain its value because it can ensure continuity and stability. On the other hand, without a plan, the business may be undervalued, especially during an emergency sale or transition. This can lead to financial losses for the owner and their family, and in some cases, the business may be forced to close its doors permanently.
- Legal complications: Illinois law requires the appointment of a conservator or executor to manage the business in the owner’s absence, which can be a lengthy and expensive process. Disputes among family members, business partners, or shareholders may likely arise when no clear plan is in place. These disputes can lead to costly litigation, further straining the business.
- Impact on employees and stakeholders: When a business lacks a succession plan, employees and other stakeholders are directly impacted. The uncertainty surrounding leadership changes can lead to high employee turnover, loss of key talent, and decreased loyalty. Suppliers, customers, and investors may lose trust in the business’s ability to continue operations smoothly, further jeopardizing the company’s future.
- Tax consequences: In Illinois, a business transfer due to an owner’s death or retirement can trigger tax liabilities if not properly planned for. Without a succession plan, the business may be subject to estate taxes, capital gains taxes or other unexpected tax burdens. These taxes can place a heavy financial strain on the business, reducing its overall value.
Developing a comprehensive succession plan is essential to better protecting your Illinois business and helping ensure its longevity. We can help you create a plan that addresses potential risks for a smooth transition when the time comes.