Monroe County, Florida Business Strategy & Succession Planning
Even the most hard-working businesspeople eventually may decide to take a step back. When you make that decision, you need to know that the company you helped build will be in good hands. It is best to have a succession plan in place from the beginning, so you are not faced with uncertainty.
Questions You Should Address
When you or another key player in your business wants to retire, there are many different aspects of the company that may be affected, all of which will have to be addressed in any succession plan you draw up. The most common questions you might ask include:
- Who will be the owner? If there’s more than one owner, what percentages will everyone own?
- Who will actually do the day-to-day running of the business?
- If any tax liability will be assessed due to a shareholder change, will it be affordable? What about the estate taxes occasioned by the death of an owner or shareholder?
- Will cash flow be affected or restricted by the loss of this person?
An ownership interest in a business with multiple owners is classified as personal property in Florida, and as such, will be appropriately taxed. However, the more important question asks what happens to said interest when an owner dies, divorces or wants to sell it. Understandably, other owners of a business tend to be wary or even outright hostile to the idea of an unknown entity having what could be a significant say in the running of their business. Any succession plan must address all the questions listed above, but must also ensure that the other owners are satisfied in the event of a sale or loss of interest.
Selling Your Business
If you can’t agree on a succession plan that suits everyones needs, your alternative is to sell the business. There are several ways to do so in Florida. You may sell right away, or you can craft an exit plan to sell in the future.
The most common provision for businesses to have in place, used to ensure fair market value is obtained, is a Buy-Sell Agreement (BSA). Sometimes executed years in advance or even at the time of the business’s creation, a BSA is binding not only on the owners and shareholders, but also on third parties like representatives. It is generally a contract setting out the specifications for an ownership transfer, in the event of a “trigger” such as the death or retirement of an owner. As long as it is sufficiently funded, a BSA safeguards against unwelcome surprises, and Internal Revenue Code §318 makes a BSA binding for purposes of establishing value. These factors can make the difference between keeping your business alive, and letting it fail.
Good Representation is Critical
No matter what the situation in your business may be, if you lack competent legal advice and counsel, your succession plan may miss something critical. The Silver Law Group has years of experience in strategy planning, and we are happy to put it to work for you. Contact our Islamorada office today to discuss your options.