If you own a business, you need a succession plan. Whether your business is just a small side business that earns a little extra spending money or your business is a complex partnership that provides for your family, the bottom line is that anyone who owns an interest in a business needs to have a succession plan in place within their overall estate plan.
A succession plan can accomplish two vital tasks—provide continuity in the event you become incapacitated and transfer your interest in the business to the intended beneficiary in the event of your death.
Absent a succession plan, your incapacity could paralyze the business. With no one in a position of legal authority to operate the business, it could fail quickly. The time it often takes to seek court approval to control the business could be more than enough time for the business to fall apart.
Your death can also wreak havoc on a business if you failed to plan ahead. If your interest in the business is a partnership interest, your share may pass to a spouse or other beneficiary; however, the beneficiary may have no interest in the business and may wind up selling your interest for far less than it is worth. Worse still, it may be impossible to sell the interest, leaving your beneficiary with nothing and the business floundering.
The lesson to learn is that if you own a business of any kind, sit down with your estate planning attorney and decide what type of succession plan you need for your business.