Failing to create a succession plan for a North Carolina business results in a few possible outcomes that might not match an owner’s wishes. Depending on how the company is structured, upon a business owner’s death, other partners may absorb business interests. A business owner could also leave shares in the business to surviving relatives in their estate plan. Alternatively, both of these actions might occur.
A company without a succession plan could experience interruptions in business, profit loss, failure to retain key employees, and other complications. The decedent’s family members might experience conflicts among each other in regards to how the business is managed and divided.
While creating a succession plan is an important step that business owners can take to ensure the longevity of a company, keeping that plan up-to-date is equally critical. North Carolina’s small businesses represent 98% of employers and support 1.6 million workers as of 2009, according to the Small Business Administration. The 2014 State of Small Business and Entrepreneurship report administered by NC State University forecasts that North Carolina’s economy will continue to experience “steady and modest growth.” Are the growing number of businesses prepared for an owner’s death or incapacitation?
Key questions to ask when you are ready to create a business succession plan in North Carolina:
1. How should the business structure change? The death of a business owner or partner prompts conversations about replacements. Is another individual slated to fill the position? A business succession plan can outline exactly how restructures should take place.
2. What is the business worth? Business valuation is important to determine how much an individual’s stake in a company is worth. If buy-sell provisions or provisions for mergers/acquisitions are included in succession plans, business appraisals will need to be addressed. Life insurance policies may also require valuation reports.
3. Who will receive business interests? Address whether or not family members will receive business shares, and if so, what their roles will be in future business decisions. If the plan calls for an individual to replace the decedent, read our tips for succession planning that might help decisions about whether a new hire or internal promotion should be made.