Business succession planning is as important as estate planning in Texas

Succession planning is as important for your business as estate planning is for your personal life.

Most people in Texas understand the significance of having an estate plan. At any age, it is important to have a legally binding, comprehensive estate plan, which often includes the following documents and aspects:

  • Last will and testament
  • Powers of attorney for financial matters
  • Advanced health care directives
  • Tax planning documentation
  • Charitable donations
  • Special instructions and provisions for children and adults with special needs

When people think of estate planning, they usually think of the personal aspects only. However, businesses and corporate entities also need similar planning. When an owner or co-owner of a corporation, partnership or other business entity dies, his or her business assets may also need to go through the probate process, just like personal assets.

Business succession planning

While most Texas business owners take all the necessary steps to set-up and maintain their businesses with proper entity formation, business agreements and updated contracts, many fail to establish succession plans. As with personal estate planning, there are many reasons people put off establishing business succession plans including the following myths:

  • There is plenty of time: A sudden illness or untimely death of a key employee or partner can throw a business into chaos if the board of directors or co-owners have not taken the time to lay out a framework of steps to take. Furthermore, a divorce of a majority shareholder can put the company in the hands of an ex-spouse who has no interest in the success of the business. Failure to plan ahead takes many options out of the hands of those who have worked hard to secure their livelihoods.
  • Keep a short-term focus: Instead of concentrating only on the day-to-day duties of business ownership, it is important to take the long view of the future of a company. Establishing long-term goals from the beginning helps provide a direction for the business, and identifying individual steps needed to attain those goals makes them more manageable. If a family member will step into your shoes once you retire, start the grooming and training process now in anticipation of a smooth handoff.
  • It is easy to sell: As retiring baby boomers flood the sales market with small and large businesses, it is not safe to assume that a buyer will be ready, willing and able to purchase your business or its assets at the time you are ready to retire or move onto something new. Considering various options with the help of a legal counselor can help you plan for a future transition.

Consult an attorney

If you are purchasing, establishing or currently own or co-own a business in Texas, seek the advice of an experienced business attorney. A lawyer knowledgeable about business and estate planning laws and issues can help you create security and peace of mind about your personal and business future.

Keywords: estate planning, succession planning, business law