By: Martin M. Shenkman, CPA, MBA, JD
Money Matters Radio – Estate Planning Q&A with Gary Goldberg
By: Martin M. Shenkman, Esq.
Introduction/Overview: For the last two weeks, we discussed business buy/sell agreements and succession planning. Let’s cover a few more issues on this topic. At best this is a “scratch” on the surface of a complex and important topic.
√ Question: What if there is no one to take over the business? No partners or key employees?
√ Answer: When there is no likely successor, you still need a succession plan. You might have the business evaluated by a business broker or merger consultant, and plan, at minimum, for them to put the business up for sale if you become disabled or die. Speed is critical in situations like this, especially if the business is closely associated with the personality and name of the founder and owner. Having a plan at the ready, with the broker meeting periodically to keep their marketing plan and data current, can make a significant difference.
√ Question: What else can be done to shore up such arrangements?
√ Answer: Having non-compete and non-disclosure agreements with key employees can protect the business. You might also create bonus compensation plans. For example, if the principal of the business becomes disabled or dies, from the date of that event to the sale, certain key employees can be offered a bonus fee or even “commission” on the sale price. This can motivate them to step up to the plate and really work hard at keeping the business together until it is sold.
√ Question: Anything else?
√ Answer: Consider a board of directors that has strategic people involved, such as the auditor for the business, a colleague, and perhaps key employee. Most closely held businesses limit the board to the founder. That can be too limiting and can prevent another component of a transition plan from becoming possible.
Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.