Formations & Succession Planning
What Is It
The term "Business Formation" means creating and forming a formal business structure with the State of Texas, such as an LLC or Corporation.
In our practice, we set up your business structure with the State of Texas on your behalf and provide you with a custom Company Agreement that dictates how both the daily and long-term transactions are handled as well as the ownership of the business. In addition, we also ensure that you are set up with your federal EIN that will allow you to set up your business bank accounts and do your taxes each year.
Business Succession Planning
"Business Succession Planning (BSP)" begins with creating a plan for who will lead the company if a certain event occurs, such as a CEO’s retirement or the death of the current business owner. This is especially important when it comes to family-owned small businesses.
The attorneys at Fergus & Tomanka recommend that Business Succession Planning be undertaken by businesses of all sizes, not just large corporations.
Why Is It Important
Did you know that forty (40) percent of small business owners are Baby Boomers and that three-quarters (3/4ths) of Boomer business owners don't actually have a plan for retirement?
What’s their excuse? They still enjoy running their businesses, which is great! But, business succession planning is something that can’t easily be done overnight.
It not only takes time to draft it out properly, it’ll take you some time to answer some of the hard to answer questions about business succession planning, like:
Identify your successors – both managers of the company and owners of the business;
Identify active and non-active roles for all family members;
Identify required training for the successor(s);
Provide necessary training to the successor to ensure the future of the business; or
Will the retiring owner remain involved in the business?
This is especially true if you have a hard-to-replicate management style or family drama, tension and/or expectations that certain individuals may or may not have (cough, cough cousin Denise).
Plus, the data also reveals that many of these business owners will need to sell their businesses in order to fund their retirement, with 45% of Boomers having no savings in place currently. If you’re thinking about selling your business, here are some considerations you should think about:
Financing options need to be considered, including financing from an external party, a previous debt holder, etc.;
Ensure the business can generate adequate after-tax cash flows to support debt and interest payments;
Tax and legal strategies and implications;
Converting your existing business structure options (e.g. sole proprietorship or partnership to LLC or Corporation, etc.);
Existing business agreements with vendors, suppliers,merchants, etc.;
Insurance needs (health, life, disability, etc.); and
You’ll need to obtain appraisal to determine fair market value of business and real estate.
Ultimate Goal Of Business Succession Planning
At Fergus & Tomanka the ultimate goal of your business succession planning is to understand the value of the business, to preserve its value and future growth potential, and to pass it forward intact.
The first step in Business Succession Planning is building your team. You’ll need to establish a team of professional advisors (attorney, CPA, bankers, financial advisors, insurance specialist).
Our business succession planning attorney will help you build out your plan to have the legalities right and will work with your other professional advisors in order to do so.