Because business can only thrive with capable leadership, establishing a business succession plan is essential for protecting a family-run or closely held business. At Fletcher Tilton, we help business owners throughout Massachusetts plan for the future.
By taking the time to understand your goals, we will design a succession plan that ensures the continuity of your business while protecting your family’s interests. Trust us to provide informed guidance on creating a seamless transition and preserving your business legacy. Contact us today to get started.
Why a Business Succession Plan Is Essential
Without a well-thought-out succession plan, your business may face significant challenges in your absence. Disputes over control of the company among family members or business partners could arise, potentially putting the future of your business at risk. By selecting a successor and clearly defining roles within the industry, you can prevent such conflicts and ensure that the most capable individual is positioned to lead.
A comprehensive business succession plan should also include guidelines for the company’s ongoing management and a dispute resolution procedure to address any issues that may arise. This proactive approach protects your business and secures your family’s and other stakeholders’ financial stability.
Understanding Business Valuation
A critical component of any business succession plan is determining an accurate valuation of your business. At Fletcher Tilton, we utilize three primary methods for valuing closely held businesses:
- The asset approach evaluates the total assets listed on the company’s balance sheet, subtracting liabilities to determine the business’s value. While straightforward, it does not account for market conditions or intangible assets like goodwill.
- The income approach combines an analysis of past earnings with projections of future earnings, aiming to determine the business’s present and future value. This method provides a more dynamic assessment of your company’s worth by evaluating future cash flow and capitalization.
- The market approach compares your business to similar companies recently sold. The business’s size, duration, and market risk are considered to arrive at a fair market value.
By utilizing the appropriate method for your situation, you will clearly understand your business’s value, which is crucial for succession planning and protecting your family’s financial future.
Transferring the Business
Fletcher Tilton is committed to ensuring a smooth transfer of your business, whether through a sale, a gift to family members, or other means. To facilitate this process, we prepare all necessary legal documentation, including buy/sell agreements. Two common types of agreements are:
- Cross-purchase agreements: Typically used in businesses with a few owners, such as partnerships, this agreement involves each partner purchasing a life insurance policy on the other partners. In the event of a partner’s death, the surviving owners use the insurance proceeds to buy out the deceased partner’s share of the business.
- Entity purchase agreements: In this arrangement, the business purchases a life insurance policy on each partner and is also the beneficiary of these policies. If a partner dies, the company uses the insurance proceeds to redeem the deceased partner’s share, thereby increasing the value of the remaining partners’ shares.
These agreements ensure that the business continues to operate without disruption and that ownership is transferred according to your wishes.
Planning for the Future
Establishing a business succession plan as early as possible is a proactive step that mitigates the potential for conflicts among family members and partners. It ensures the long-term viability of your business when you are no longer at the helm, putting you in control of your business’s future.
At Fletcher Tilton, we will work closely with you to understand your business objectives, the roles of family members and partners, and your vision for the future. We then design a comprehensive succession plan that protects your business and personal assets and the interests of your surviving loved ones.
With a well-designed business succession plan, you can preserve your life’s work and brand for future generations. Our experienced attorneys provide the legal support you need to ensure a smooth transition and maintain your business’s continuity and success.
Contact Fletcher Tilton for Business Succession Planning
Business succession planning is a crucial step in safeguarding your business’s future. At Fletcher Tilton, we are dedicated to helping you develop a plan that meets your unique needs and goals. Contact us today to schedule a consultation and take the first step in securing your business legacy.
Our Estate Planning department is one of the largest and most respected in the region. We advise and prepare plans for business owners, physicians and other professionals on matters relating to trusts and wills, as well as to succession planning, the use of stock transfer restrictions, voting trusts, deferred compensation agreements and shareholder agreements.
Representative Matters:
- Our firm has represented a family-owned local contract manufacturing business, transferring ownership, decision making and control to the second generation.
- For numerous family-owned businesses, we have assisted the owners in developing and implementing a succession plan.
- Our firm has represented the surviving shareholder in the redemption and purchase of a family owned multi-franchise business.