May 25, 2012
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Over the years we have done several educational sessions for business owners and their families on Succession Planning. The question that is most frequently asked during these sessions is: "Where do I start?"

To assist business owners with taking the necessary first step in developing a succession plan, we have created a checklist that outlines key areas for consideration. Business owners can use this list to "start" a conversation with a business advisor such as their lawyer. This important first step will lead to a succession plan that will prepare the business for transition and maximize its value either for a sale of the business or for the family members who take over the business. Other benefits of early planning are:

  • Successor(s) can be trained to assume the leadership role
  • Education and careers can be steered appropriately
  • Current owner(s) can develop a vision for the growth of the business
  • Family members will be looked after should an unexpected event occur such as a critical illness or accident

Key issues to address in the succession plan include:

Business Structure

  • Current owner(s) future financial security
  • Appropriate corporate structure for the business
  • Identification of personal assets
  • Voting control and tax structure
  • Appearance and contents of financial statements
  • Compensation strategy and performance evaluations
  • Current owner(s) plan for management, leadership, and involvement
  • Consideration for family members with no interest in the business

Employment Matters

  • Role of key person(s) in your business
  • Underperforming long-service employees
  • Employees vs. independent contractors and ensuring they are documented appropriately
  • Employment contracts including confidentiality and non-compete clauses

Operational Arrangements

  • Ensuring leases/agreements/contracts are up to date and effective
  • Protection of intellectual property
  • Ensuring transferability of licenses/permits
  • Ensuring that financing is available and/or assumable
  • Implications for personal guarantees which require a release

Financial and Tax Issues

  • The lawyer will also work with the business owner’s banker and accountant to ensure that the best tax strategies and financing options are clearly identified and implemented as required.
This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Business Law