Life is dynamic, and so the sooner you have a plan in place, the better for you and your business.  However, not all business succession plans are equal in effectiveness and value to you and your business. You will want a plan that will ensure the transition will play out as you had envisioned when crafting the plan. Complicating things further, your plan must also be flexible or at least easily changeable enough to account for all the twists and turns life has to offer. An attorney experienced in estate planning as well as business law can help you craft a business succession tailored to your specific business and family situation.

Selecting the right individual to pass the reins of the company on to is key. You may want a family member or heir who fully knows your business and your business model to take over, someone that can be both “chief-cook and bottlewasher.” However, are you sure that your preferred individual wants to run the business in your absence, and are they ready? Perhaps it your situation it would make more sense to transfer authority and responsibility over a period of time as opposed to all-at-once. An arrangement could include or allow your chosen individual to step in if you are sick, disabled, or are simply on vacation, thereby growing their knowledge and your confidence in their ultimate transition. However, you should keep in mind the differences between management and ownership. Given your business’ needs, it can be more appropriate in certain situations to plan for a key employee to manage the business after you step down while leaving the economic benefits to your children.

If you are fortunate to have multiple qualified family members to choose from, the decision can be far more difficult. The distribution of money and assets among siblings can be especially divisive and you will have to decide which child will be provided with control of your business after you, and which children merely enjoy minority ownership rights or simply some voting stock. In this instance your core objective is to divide up business responsibilities and assets in a way that allows your business to thrive--and preserves family harmony.

An attorney knowledgeable in Minnesota business law and Minnesota estate planning can help you select and draft your business succession plan to meet your business and family needs. A business succession plan can include any number of provisions including, but not limited to,

• distribution of business stock/assets
• debt retirement schedules
• life insurance policies
• buy-sell agreements
• division of responsibilities among successors
• establishing the value of your business

When thinking about business succession planning it will be necessary to accurately determine your company's current human and financial resources, and to clearly establish your goals and objectives.  The family members running the business will need to give serious thought to how much control of the business they want to maintain, and for how long. You will need to ask yourself if there is someone capable of running the business once you step down. You should consider if there are key employees for whom it will be critical to retain after you step down.  Finally, and importantly, you will need to determine the impact of state and federal estate tax laws as well as your financial goals while considering if there are sufficient assets to pay the estate tax, equalize the estate, and keep the business.

There are numerous factors to consider in crafting, and a variety of options you can build into, a business succession plan for your family-owned business. An attorney experienced in both business law and estate planning can assist you in making well-informed choices and in drafting your plan to better meet the needs of your business and your wishes for it to continue in the hands of family members or heirs.

The above is intended as a broad overview of issues involved in the creation of a business succession plan and is not an exhaustive explanation that could be relied upon as legal advice. Please contact an attorney to address your specific issues before taking any actions.