Arkansas Business Succession Attorney

No company can survive without an able owner or manager at the helm.  In the event of a key person’s sudden death, illness, or retirement, businesses are often left scrambling to find a suitable replacement. Large corporations and small businesses alike can avoid a tumultuous transition by establishing a succession plan with a knowledgeable attorney.

Without a Plan

If an owner or shareholder does not have a succession plan in place, his or her stake in the company is either passed on to relatives as part of the estate, absorbed by other shareholders, or a combination of the two.  In family-owned businesses, this often leads to disputes between other owners, siblings, children and other relatives.  Likewise, those owners more active in the day-to-day operations of the business may feel entitled to a larger share of the business than those owners who are not involved.

In larger corporations, employees and clients may leave the company for fear of instability.  Additionally, without prior planning, the remaining shareholders may not have sufficient resources needed to purchase the interests of the exiting or deceased shareholder.  This can result in disputes, business interruptions and possibly the dissolution of the business. 

With a Plan

An attorney with expertise in business and estate planning can help owners and shareholders put together a plan that facilitates a smooth transition.  Plans are customarily created after employees, coworkers, shareholders and family members have been consulted and goals for the future of the company have been outlined.

Succession planning can be tailor-made to fit any business model and should address the following issues:

  • Keep the business within the family. With a retention plan, a spouse, children, or other relatives may retain control of assets.
  • Offer shareholders or vital employees a larger stake in the company. Interested parties stipulated in the plan will be granted the right of first refusal, or the ability to accept or reject the shares of the exiting or deceased owner before they are offered to individuals outside of the company. The price of the shares can be determined by a valuation mechanism agreed upon during succession plan negotiations. For example, a valuation mechanism may require that shares be offered at their prevailing market value, or require multiple professional business valuation appraisals
  • Address issues related to your estate plan as well as minimization of potential estate taxes.
  • Preserve “institutional memory” when you or other current managers are no longer running the business.  For example, you can empower advisors to aid the transition team and ensure continuity, oversee day-to-day operations, provide provisions for heirs who are not directly involved in the business, and provide education and training to family members and key employees who will take over the business.
  • Establish measures to ensure the business has enough cash flow to pay taxes or buy out a deceased owner’s share of the company.
  • Implement a family employment plan with policies and procedures regarding when and how family members will be hired, who will supervise them, and how compensation will be determined.
  • Other arrangements can be made that would transfer the owner or executive’s interest into trusts to be paid out to family members. Assets may also be divided among employees or in other cases, it may be best to sell the company.

With so many factors to consider, it is important that you consult an experienced business planning attorney who can understand all of the interests at stake and work with you to protect them.




 



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