Family businesses are the backbone of the U.S. economy, employing over 42 million workers and accounting for 34.1% of the workforce, according to the U.S. Small Business Administration. Yet, ensuring the longevity of these businesses requires careful planning. Succession planning is a crucial step that helps preserve a family’s legacy, secure its employees’ futures, and maintain its contribution to the economy.
At SCC Legal, we’ve spent more than forty years assisting New Jersey families and their businesses with trusted legal counsel and tailored solutions. From drafting essential documents to crafting comprehensive succession plans, we’re committed to guiding you through every step of the process. In this guide, we’ll explore the importance of business succession planning, its benefits for family businesses, and how SCC Legal can help secure the future of your enterprise.
What Is Succession Planning?
Succession planning is a business strategy that ensures someone is appointed to continue the business when the owner retires or passes away. It reflects the business founder or owner’s wishes and reduces potential business risks by creating stability that allows the company to continue flourishing. Preparation is key for proper business succession planning, especially in family businesses. A clear and well-prepared succession plan should be drafted with the assistance of competent and experienced advisors, such as the SCC Legal team. Review it regularly to confirm the document continues to reflect your wishes.
Why Do Family Businesses Need A Succession Plan?
The majority of people start businesses to provide for their families. However, there comes a time when they want to retire, withdraw from day-to-day operations, or are forced to disengage due to a disability. A family business succession plan ensures continuity, while minimizing the likelihood of conflict between loved ones. It is challenging to select a successor if you have several family members in the business, and each one has unique strengths. Succession planning offers an opportunity to listen to various opinions and make a final decision with the assistance of a neutral party specializing in business law.
How Do I Create A Succession Plan?
In general, we know that smaller businesses in NJ are closely held corporations with a small number of shareholders. A written, legally documented succession plan for the family business drafted with the assistance of a business law attorney at SCC Legal will identify and address issues that might cause conflict. It could even include the terms of a third-party buyout. Include the business succession plan in your estate plan and will, and inform your family fully on the plan’s terms.
Managing Estate Equity in New Jersey
The goal is generally to divide an inheritance or estate equally among heirs. It can become problematic if one person is involved in the family business and the size of the company they expect to inherit is large relative to the total assets of your estate. One of the ways to establish estate equity is by determining how much the business is worth and purchasing life insurance equal to its value that will go to the heirs not active in the company. The SCC Legal Estate and Business Succession Planning team is ready to help you establish estate equity and draft a family business succession plan that reflects your desires.
For more information on areas of business law or if you want to discuss succession planning for family businesses in NJ, please contact our team at SCC Legal today or visit us at: https://www.scclegal.com/