Crisis and Succession Planning for Business Owners

Crisis and Succession Planning for Business Owners

 

Business owners should create and implement a plan for what will happen in their absence. The business owner has invested time, money and effort into building the business and it will need  to continue operating in the owner’s absence. To avoid uncertainty and instability, there should be a clear plan,  a transition of duties, and the granting of authority to key people who can take over management in the business owner’s absence.

 

The plan should address both short-term situations (vacation or short-term illness/hospitalization) and longer-term situations (death or permanent disability). The business owner will need to share the plan with his or her executive team and train key participants on aspects of business operations he or she might be responsible for handling.

 

The most basic document to have in place is a Power of Attorney, designating someone who can sign documents and make financial decisions on behalf of the business in your absence. Bills and payroll will need to be paid for the business to continue uninterrupted. The POA can be tailored to fit the situation with provisions that limit authority to strictly business matters, limit the authority to make certain decisions (such as selling the business), or even require monitoring of all transactions and financial matters by a third party (where appropriate).

 

Another basic document to have in place is a summary of your business’ digital assets such as log-in credentials and passwords for business and bank related websites necessary to carry on day-to-day business affairs.

 

A succession plan can detail the plan for transition of ownership and management when you are permanently stepping down from the business (voluntarily or involuntarily). This involves more complex planning, and in many cases, tax planning for the business owner to minimize tax liabilities. Advance planning facilitates a smooth transition and minimizes family fighting and power plays among the executive team.

 

If you own a business, protecting the business legacy and preserving the value of the business is something to get on your 2024 to-do list. Evans Fox has a team of experienced estate planning and business succession attorneys that help you navigate the planning process and have peace of mind that the business is in good hands for the future.

 

The forgoing is not intended to be and should not be construed as legal advice.  Only after an attorney client relationship is established in writing may legal advice be given.

ATTORNEY ADVERTISING

Tracy Jong is a Senior attorney at Evans Fox LLP with 30 years of experience focusing her practice in business law, intellectual property and licensing for alcohol and cannabis. Tracy Jong is a member of the New York Bar and is a registered attorney at the United States Patent and Trademark Office. She can be reached at [email protected].