Business Succession Attorneys in Berrien County, MI
Many entrepreneurs and business owners spend significant time planning for their company’s future. However, many people fail to plan for when they leave the company. Business succession planning prepares for a company’s future once its owner is deceased, retired, or unable to work. These plans are crucial to preserve your company’s legacy for years.
Whether you need help with a small family business or a large-scale corporation, our business succession attorneys in Berrien County, Michigan, are here to uphold your dream and help ensure your business is in the right hands. Serving Southwest Michigan, Legacy Counsel offers a comprehensive suite of estate planning services for building and establishing Michigan succession plans, handling all aspects from initial planning to the transfer of ownership.
Call 269-932-4017 for a Consultation.
What to Consider in a Business Succession Plan
Whether you plan on retiring or inheriting a business, you must figure out how to begin a business succession plan. Here are some essential things to consider and do when you’re first planning out your business ownership transfer:
- Set Your Goals: Determine the goals you want to achieve with your business succession plan, whether preserving your family’s legacy, maximizing value for stakeholders, or otherwise.
- Choose a Successor: Decide whether you want to promote employees internally, have a family member step in, or hire someone outside the company to take over your role.
- Put Milestones in Place: Establish a realistic timeline for each step in the succession.
- Keep Your Plan Up to Date: Regularly review your plan and make necessary updates or changes.
Our Attorneys Help With Your Business Succession Needs
- Provide Advice on Candidates & Ownership Transfer Options
- Accurately Define Assets & the Overall Value of Your Business
- Navigate Legal & Tax Complexities During a Transfer
- Draft a Unique Plan That Addresses Your Company’s Needs
- Structure & Execute Agreements for Ownership Transfers
Why Work With Legacy Counsel?
Our services extend beyond being lawyers, by helping Michigan business owners and entrepreneurs handle the sale or transfer of their companies after they pass. We nurture client relationships and remain accessible. From the moment you come to Legacy Counsel, we commit to being with you and your employees every step of the way.
Legacy Counsel’s Clients Benefit From:
- A Tailored Approach to Business Succession Planning
- Clear & Upfront Pricing
- Regular & Detailed Planning Timelines
- Open & Honest Communication
- E-Signature Capability, Virtual Consults & Expedited Services
Contact Legacy Counsel today to book a consultation. We will answer your questions and address your concerns. Schedule a Consultation
Business Succession Plans in Michigan
Business succession planning is essential for seamlessly transferring ownership and duties within your company. However, the process can involve significant legal and tax implications, intricate ownership structures, and collaboration with experts.
That’s why it’s best to consult with an experienced legal advisor who understands how much your business means to you and can help you navigate the succession planning journey. As part of your comprehensive estate plan with Legacy Counsel, our Berrien County business transition attorneys can craft a succession plan tailored to your needs.
When is Business Succession Planning Necessary?
Business succession planning can be necessary regardless of a company’s type, size, or history. When key leaders depart from a business, its foundation can quickly crumble. Without a strategic plan, the company to which you might have dedicated years of your life could struggle or even fail in your absence.
Types of Business Succession Plans
There are many business succession strategies, but the plans generally fall into two categories in Michigan: long-term plans and emergency plans.
Long-Term Succession Plans
Long-term succession plans are typically made in preparation for an owner’s retirement or other anticipated event. These plans are generally drafted a few years before the owner’s departure, and their proactive nature makes them easier to implement, allowing for a smoother transition.
Emergency Succession Plans
Emergency succession plans typically outline a pre-defined course of action if an unexpected change in the business occurs, such as an owner’s death or sudden serious illness. Unforeseen events can get in the way of a smooth transfer of ownership, but an emergency succession plan helps minimize disruption as much as possible.
Necessary Documents in Business Succession Plans
If you’re looking to draft a succession plan for your company, you will need to understand the various legal documents and processes involved.
Appraisals or Business Valuations
Assessing your company’s value is fundamental for determining a fair transfer price and succession terms and estimating potential tax liabilities. Here’s a breakdown of the two key evaluation processes:
- Appraisals: Focus on the worth of specific tangible assets within the company.
- Valuations: Offer a holistic view of the company’s fair market value, encompassing all aspects of the business.
Financial professionals like CPAs, brokers, or accredited appraisers typically conduct these evaluations. At Legacy Counsel’s office in St. Joseph, our business succession attorneys collaborate with these experts to ensure an accurate valuation of your company, aiding in strategic planning.
Entity Purchase Agreements
Entity-purchase agreements are key in multi-owner companies, detailing conditions for the company to buy back shares upon an owner’s death or other events like disability, retirement, or divorce. They often include provisions for buyout funding, such as life insurance for owners, ensuring financial readiness for such buyouts. These agreements aid in maintaining business continuity for remaining owners while assuring departing owners or their heirs of a fair price and immediate payment, thus providing stability and financial assurance for all parties involved.
Buy/Sell Agreements
Buy/sell agreements are essential for small businesses with limited owners, acting as contracts that specify the terms for transferring ownership stakes under certain conditions. They serve as a partnership’s safety net and are best established early on, although they can be created or modified at any business stage. These agreements—which can be either cross-purchase agreements where owners insure against each other’s shares or redemption agreements where the company buys back the shares—are activated by divorce, bankruptcy, or disability. They provide flexibility in deciding the successor and setting the purchase price, ensuring a smooth ownership transition.
Employee Stock Ownership Plans
Employee stock ownership plans (ESOPs) benefit larger businesses, offering employees ownership stakes via a trust, which can buy shares over time. ESOPs reward tenure, fostering loyalty and productivity among employees. They play a strategic role in business succession, gradually enabling a smoother changeover by distributing assets, thus ensuring operational continuity. Additionally, ESOPs provide tax benefits, with tax deductions for the company and deferred benefits for the employees, making them a financially attractive succession option.
Management Buyout Plans
Management buyout plans (MBOs) allow a company’s existing management team to acquire ownership from the current owners, often through financing or equity arrangements. This provides a clear path for internal leadership transitions. MBOs are often an attractive option in family-owned businesses where keeping the company “in the family” is a priority.
With an MBO, the company stays in the hands of experienced individuals who already know the business inside-out. However, the success of an MBO heavily relies on your management team’s abilities and leadership skills. If you have an established company with a strong leadership team and a clear growth potential, consider having an MBO as part of your business succession plan.
Michigan Business Succession Planning FAQs
How do I choose a successor for my business?
It’s important to consider a few factors when choosing someone to take over important roles in your company, such as:
- Their experience and duration with the company
- Their management style and leadership skills
- Their alignment with your company’s vision and core values
- Their passion for the job
- Their willingness to step in, refine their skills, and grow as a leader
- Their existing relationships with clients, stakeholders, and other employees
If you do not already have an heir listed in your estate plan to take over your company, you will need to find a qualified candidate, whether they’re an employee or outside talent you wish to acquire.
It’s crucial to remain unbiased and objective when evaluating potential candidates to be successors and inherit your business. Our attorneys can provide an outside perspective and advise you on nominations and individuals best suited for different leadership positions based on your business’s needs and best interests.
What Are the Risks of Not Having a Succession Plan?
There are numerous risks of not having a solid succession plan for your business. For instance, you might experience:
- Loss of key employees and stakeholders
- Distrust from investors due to adverse effects of a rocky transition
- Decrease in the overall value of your company
- Delayed decision-making and confusion among employees
- Reduced employee morale and productivity
What are some challenges of business succession planning?
Various problems can arise during business succession planning, including employee disputes, market uncertainty, and other external factors. An experienced lawyer can help you anticipate and mitigate these risks.
What are some ways to transfer ownership as a small business in Michigan?
You can facilitate an ownership transfer in several ways if you are a small business owner. You could perform an outright sale, allowing you to receive full payment immediately and sell your business and its assets entirely. However, you may wish to conduct a gradual sale of your company instead to allow for more flexibility. This involves the buyer financing a long-term payment plan to the seller until the debt is paid off.
What if I transfer business ownership temporarily?
If you’re taking a sabbatical or long break from work and cannot perform the duties of your role within a company, you may opt to transfer your business to someone else through a lease. A lease will specify the terms and conditions of the transfer and grant the signee rights in your absence. Upon your return, the contract is terminated, and you can resume your role as owner.
How does business succession affect estate taxes?
Transferring ownership of a business, be it a family, small, or self-employed venture, can entail estate and gift tax liabilities as per IRS regulations. However, business owners can lessen these taxes by gifting business shares to heirs or successors, with gifts below a specified exclusion amount typically exempt from gift tax—details of which are available under the IRS’s ‘annual exclusions’ section. Moreover, knowing the business assets’ value enables owners to employ tax-advantaged strategies like trusts, gifting plans, or life insurance to ensure a smooth transition and tax burden reduction.
Business Transition Attorneys to Protect Your Legacy
Based in St. Joseph, Legacy Counsel PLC is a boutique estate planning and probate law firm serving Southwest Michigan, including Berrien County, Cass County, Van Buren County, and more.
Call 269-932-4017.
