Most business owners, if you ask them, probably have a basic idea of what succession planning is all about: deciding how ownership interests will be passed when they or their partners or co-owners leave the company. The problem for many business owners is taking the initiative to get an appropriate succession plan in place. Once the inertia to doing so is overcome, though, getting an effective plan in place doesn’t have to be that hard.  

As a recent Huffington Post article points out, business owners can fall into the same mentality with succession planning that many people fall into with estate planning: “we don’t need to plan for that right now; we can do that later.” While this may work out in some cases, the risk can be high, depending on the circumstances of the company. When a business co-owner dies, it can throw the business for a loop not only in day-to-day operations, but also finding a replacement and working out business matters with the deceased owner’s spouse. 

Succession planning, not surprisingly, is most effective when it is engaged well before the need for a plan arises and when the plan is reviewed on an ongoing basis. Planning is best done early so that a company has time to position itself to go the direction the company needs to go after a co-owner’s death. This is particularly true of finding an appropriate replacement. In addition, succession planning is most effective when it is regularly reviewed to ensure that the plan is still appropriate to the current circumstances and needs of the business. These circumstances can change, as can business goals, and succession planning often needs to reflect these changes.

Working with an experienced attorney on the task of succession planning is important to ensure things are done correctly from a legal standpoint, that a business’ needs are addressed, and that a business can ultimately move on after the death of a partner with confidence.