Business Succession Planning for Small Business Owners in Florida
Lake Mary, Winter Park, Longwood, and Maitland, Florida Business Law & Business Succession Attorney
One thing few successful
business owners plan for is their own death or disability. Who will run the business when you are no
longer able to? Who will own the
business after your death? Many
successful small businesses fail simply because ownership end up going to
people who are not capable of the responsibility, or who are unable to get
along with each other and jointly make the decisions necessary to ensure its
It is first important to
understand that the management of the business will ultimately be controlled by
its owners (shareholders in the case of a corporation, members in the case of a
limited liability company) through their legal power to directly or indirectly
appoint the persons who will run the business.
So the first step should be to
ensure that ownership passes quickly and smoothly to the new owners without
being tied up in an unnecessary probate or guardianship proceeding. This can be done by titling your stock or
membership interests to your own living trust.
In the living trust you can
appoint a successor trustee or trustees who will have the power to immediately
exercise management rights upon your incapacity or, in the event of your death,
until the ownership is transferred to the trust beneficiaries. In the trust you can also specify who will be
the new owner or owners of your stock or membership interest.
It is in cases where
ownership will be split up amongst more than one beneficiary that the thorniest
problems can arise. What if one of your
children is responsible and one is not, but you want them both to share in the
profits of the business? In that case
you could set up a shareholders’ agreement prior to your death that will specify
that only the responsible child will have management rights. You can also provide for optional or
mandatory buy-out rights, where for example the child managing the business
will have the right to buy out the non-managing child.
If it is your wish that
trusted employees will run the business and perhaps own a share, while some or
most of the profits will go to your children, perhaps with buyout rights via
which the employees can or must buy out the children, you can also use a
shareholders’ agreement to provide for this.
You can also establish a
“voting trust” whereby your chosen, trustworthy persons will act as trustees to
vote the stock of minor children or less responsible individuals.
There are many options
available, depending on what goals you hope to achieve. For more information on business succession
planning in Florida, please contact us.