February 1, 2018 | lmsXpect3 Most people spend years building up a family-owned business, largely because they want to have something tangible to pass on to their children. In addition to a solid financial foundation, succession plans must also include a solid legal foundation. Here are some ways to develop just such a plan. Set Clear Goals and Objectives Typically, the business already has a very informal succession plan in place. An attorney should evaluate this plan to ensure that it is consistent with the business goals in terms of things like: Management: Many businesses want to preserve family ownership but also want to incorporate outside managers. The lines should be drawn very clearly. Business Goals: Obviously, generating revenue is often an overriding concern. But what about other goals, such as involving family members, pursuing certain goals, and avoiding certain activities? And to what extent, if any, should these other goals take precedence over profits? The final plan should be specific enough to provide clear direction yet flexible enough to adapt to changing circumstances. Establish a Clear Decision Making Process The leadership plan should include a dispute resolution process, because these issues are almost inevitable. The plan should be part of a personal or business will and clearly communicated to employees and shareholders. Designate the Leadership Team Do not rely on a generic will to fulfill this role. Stepchildren typically have no inheritance rights under a standard will unless they are specifically named in the document. Furthermore, their rights and duties must be clearly spelled out. Otherwise, a court will probably fill in the blanks, and no one really wants that to happen. Merge the Business with an Estate Plan This step should address tax and continuity concerns. Sometimes, it’s a good idea to place the business into a living trust to both minimize tax consequences and speed the leadership transition process. A well designed buy-sell agreement is usually a good idea. Said agreement should probably include provisions for estranged family members, if there are any. Set Up a Transition Plan This final step should include all the practical transition aspects, such as the method of change, financing options, provisions for retiring owners, and a timetable for implementation. Reach Out to an Experienced Attorney Your family business needs special protection. For a confidential consultation with an experienced estate planning attorney in Renton, contact the Law Offices of Dan Kellogg. Convenient payment plans are available.