It is a proactive and prudent responsibility to set in place a written plan of succession for your business.
Many small businesses go under after the death of the original owner because there was no clear plan in place.
Business agreements are separate from the will and testament
Make every effort to ensure that your new partnership agreements have the correct designees listed. Buy-sell options and by-laws impact future managers’ ability to make the asset liquid if needed. Specify your wishes in writing so that there is no ambiguity.
Also, make sure that your succession plan is a separate document from your individual will and testament. This will keep family disputes distinct from business conflicts as much as possible.
Specify who will get which shares of the business
If you designate six beneficiaries of your business in your last will and testament, the probate administrator will assume that you want the assets of the business distributed evenly. But think this through. Are all six people of equal value to the business? Are they all co-owners? What if one person transfers their share to another, thus creating a majority shareholder, weakening the power and status of the other four? A business succession plan should identify a clear recipient of the business and clearly outline the division of the assets.
Virginia’s State Corporation Commission (SCC) stipulates that a business succession plan is the best way to provide for your clients’ interests. If you have a small business, this document does not have to be extensive, but it does need to be specific and clear enough for all interested parties to understand.