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What options do business owners have for succession planning?

On Behalf of | Jan 25, 2022 | Business Law

Business owners in Arkansas dedicate themselves to the success of their business. It is more than a job for most business owners and they care about not only the business, but the people involved in the business. However, business owners like anyone else will grow older and eventually they will not be able to run the business properly. This does not mean that the business needs to dissolve though.

The business may still be doing well with many existing clients and employees. It may be beneficial to many different people that the business continue on, but in order to do that leadership needs to be passed on to new individuals. This can be a complicated process in some situations, which is why business owners should have a good business succession plan.

Options for business succession

There are different ways that this can be accomplished, but some of the common ways it can occur are:

  • Selling to a co-owner. If the business is set up as a partnership, the business can continue on with the other partner. However, the remaining partner will need to buy the other’s interest in the business.
  • Allow child or heir to take over. Family members may be able to step into leadership roles in the company. It is best if a family member has been involved in the business throughout and knows how to run it, but it can become complicated if multiple family members want to take over.
  • Allow other leaders within the company to take over. Sometimes it can be the easiest and smoothest option to simply sell the company to a long-time experienced employee who already has relationships and knows how to run the company. This can be accomplished through buy-sell agreements between the owner and employee.
  • Put the company up for sale. The owner may just place the business up for sale and sell it to an interested outside party willing to buy it from the current owner. The structure of these sales will be outlined in purchase agreements, but determining the value of the business can be complicated in some situations.

Deciding when it is time to leave a business someone built can be difficult. However, at some point in time every business owner in Arkansas will have to make the choice to leave. It is best to plan for this well in advance though so the people taking over the company are in the best position to succeed and keep everything operating smoothly. The plans are often stated in operating agreements or bylaws and should be stated clearly and concisely to avoid any disputes. Experienced attorneys understand the different options business owners have and may be able advise them on the best strategies.