Can't Take your Business with you

What to do about your business will come down to 2 main options.

  1. Transfer the business to your successor or heirs.
  2. Sell or transfer the business to outsiders, your employees, or your managers.

If you haven’t put in place a succession plan, allowing for the ongoing life of the business after you have gone, or providing for a sale of the business to outsiders as a going concern, it is unlikely that the executor of your estate will be able to do anything more than liquidate the company, or sell it outright to others.

This is alright, but sometimes because of the need to cash in the assets of the estate, the business could be sold off with terms not as favourable as if a plan was put in place.

Transfer to Successors or Heirs
If the business is a family business, the owner will want to perpetuate the business and transfer it to family members when he/she has gone. The owner will want to preserve the leadership of the business in family hands, so his/her wishes should be put down in a properly set out plan.

Planning for succession, where family is concerned, is important. The fact is, if there is no succession plan in place the business will be transferred, sometimes under duress, (in order to cash in the business) and this may be disastrous for the family.

You may decide to take the option of selling the business to your employees or to a third party outright, or to your partners or managers (via a buy/sell agreement) or to the public (via a stock offering – if a public company).

If you want to pass on your business to your family members, succession involves two main issues.

  1. Transfer of power – where the power or control over the business is transferred to those who are best suited.

  2. Transfer of assets – where the assets are transferred to a family member or group of family members who may be different people than those you transferred power to.

Sell or Transfer the Business to Outsiders
Buyers of the business can come from anywhere. They might be your suppliers, your competition, your customers, or new people. The buyers put forward by your business broker might be; financial buyers (those who intend to run it as a profitable operation), strategic buyers (those who may be competitors or similar, buying it for strategic reasons) or people who are related to the family in some way.

The last option is where the business is so good; you may be able to sell it to the general public via an IPO.

© 2005 StartRunGrow

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