Small businesses are an essential part of the Mississippi economy. However, when a small business owner fails to plan for their succession, the owner’s death can cause a host of problems for the business. Forgetting this essential element can cause the business to close which may be the opposite of the owner’s intent.
Biz Journals that about a third of Fortune 500 businesses are family-owned. Not to mention that they account for about half the nation’s GDP. The Journal conducted a recent survey and found that the majority of these businesses had no succession plan or an underdeveloped one.
Family members and employees of the business may dispute the succession if there is not a good one in place upon the death of the owner. While the succession fight rages on, the business assets are unavailable putting the entire operation at risk. Liquidation of the business upon the death of the primary owner is not always possible or the most lucrative.
Forbes mentions that many business owners want to pass on something to their heirs when they die. There are ways to prevent the business from spending years in probate or cause infighting between those left behind. Family businesses need proper estate planning that addresses how the beneficiaries deal with the business.
Creating a legal contract between co-owners such as a buy-sell agreement can help decrease business litigation after one owner passes. This type of agreement allows the business to purchase one owner’s stake in the company for an agreed-upon price to the family. These types of agreements can help limit litigation.