Welcome to the latest issue of the Randel Law Blog. In a previous issue we talked about Six Benefits of Succession Planning. In spite of the benefits, many business owners are hesitant to start the planning process, partly because they’re unsure of what it’s going to involve.
That’s why I’ve developed an outline of the succession planning process to help owners know what to expect. I call it the Succession Plan Roadmap (see below). Over the years I have fine-tuned this process into a system using templates that make the process simpler and easier for my clients.
Of course every owner has unique objectives and circumstances, so no two plans ever unfold exactly the same way. But this should give you a good idea of how the typical process works. I’m always happy to go over the Roadmap with a business owner as a courtesy, just for educational purposes, even if they’re not ready to start the process right away. So if you know any business owners who may find this of value, feel free to forward this to them.
I hope you enjoy the Roadmap. I look forward to your questions and comments. Thanks for your continued support of my firm.
Rick Randel
Succession Plan Roadmap
Step 1: Introductory meeting
Step 2: Data Collection
⇒Determine owner objectives:
»Liquidity?
»Retirement?
»Continuity of Firm?
»Leadership Succession?
»Provide for Family?
»Reduce Taxes?
»Time frame
⇒Gather information relevant to plan (owner fills out Client Questionnaire)
⇒Contact and request input from other advisers, e.g.:
»Accountant
»Estate Planning Attorney
»Financial Advisor (e.g.how much does the owner need to retire?)
»M&A Advisor/Business Broker
»Insurance Advisor
»Other (e.g., business consultant, succession planner, etc.)
⇒Obtain valuation of business
Step 3: Review and analyze information collected
⇒Prepare Client Data Sheet
Step 4: Consider potential vehicle(s) for plan, e.g.:
⇒Internal family transition
»Gift or sale?
»Estate planning trusts?
⇒Sale to key employees/management team?
⇒Sale to outside buyer?
⇒Stock Option Plan?
⇒Private Equity recap?
⇒Other?
Step 5: Strategic planning meeting/conference call with client and adviser team
⇒Discuss potential tax reduction strategies
⇒Discuss potential estate planning strategies
⇒Discuss potential funding strategies
⇒Decide on ideal vehicle(s) for succession
⇒Agree on action steps and timetable
Step 6: Prepare initial outline of plan and circulate among client and adviser team
⇒Owner objectives
⇒Vehicle(s) chosen
⇒Action items
⇒Documents needed, e.g.
»Stock Purchase Agreement(s)
»Promissory note(s)
»Pledge agreement(s)
»Trust agreement
»Buy-sell agreement
»Gift letters
»New stock certificates
⇒Timetable
Step 7: Meeting/conference call with client and adviser team
⇒Go over draft plan, revise per input, discuss timetable, etc.
Step 8: Revise and finalize plan
Step 9: Prepare documents to implement plan and circulate for comment
Step 8: Revise documents per feedback
Step 9: Finalize and sign documents
⇒Take other actions to implement plan including share transfers, transmittal of funds, update stock ledger, etc.
Step 10: Calendar follow-up items
⇒Reminders to conduct subsequent rounds/stages of the plan, update valuation/insurance coverage, etc.
This article is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter. You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.
