For many entrepreneurs and small business owners in Michigan, maintaining a stable balance sheet and positive cash flow can be a continuous battle that consumes most of their time. Retirement or handing over the business are not often thought about. However, creating a sound business succession plan is beneficial for nearly all business owners. Here are a few things to consider when creating a suitable and successful succession plan.
Choosing a successor
Many business owners want their businesses to continue even after they’re gone. Choosing a successor can be as simple as appointing an assistant or close family member to take the owner’s place. Sometimes, there may be several candidates to choose from. Rather than create resentment, those who don’t want a successor can use a buy-sell agreement to simply sell their portion to the other partners of the business.
Determine the value of the business
A set dollar value for the business, or the exiting share, needs to be determined when business owners choose to cash out. This is commonly done through an arbitrary agreement between the partners involved or through an appraisal by a certified public accountant (CPA). If the piece of the business consists of publicly traded shares of stock, then the value of the owner’s portion will be dictated by the stock’s current market value.
The bottom line: business succession planning requires the proper attention and preparation. Business owners in Michigan who seek a smooth and equitable transition of their business or partnership interests can consult a seasoned legal representative to assist them in important business decisions. An attorney knowledgeable in business law can offer invaluable legal guidance and answer any difficult questions that business owners may have.
