Succession plan may be a crucial component of contract law

On Behalf of | Nov 6, 2020 | Contract Law |

Many people who own a business in North Carolina may assume that when they retire or pass away that their children will take over the company. There are some instances where that is precisely what happens, but not always. Some parents may incorrectly assume that their children want to inherit the business when the kids have no desire to do so or may not want to share duties with their siblings. Having a legally-documented succession plan can alleviate some of these doubts for all interested parties, and it is a part of contract law that all business owners should think about.

To make succession as simple as possible, business owners need to allow ample time for discussion and any associated legal proceedings. Like many business decisions, this one will not likely happen quickly and will need input from one’s children who might inherit the business as well as trusted legal and financial professionals. The plan needs to outline not just the allocation of assets but precisely who will handle the business and any plans for financing. The potential tax liabilities are precisely why professional advisors should be part of the process.

Business owners will also have to understand that their heirs may have different ideas for running the business, particularly as certain aspects become modernized. That being said, owners should take into consideration the brand they have so diligently built and whether their heirs will honor it. Customer retention may be directly affected if a new owner fails to realize exactly what it is that makes the business special and keeps people coming back.

It may be exciting or difficult for business owners to think about passing their business to the next generation. However, it is important that they have a succession plan in place to give their company the best chance at thriving under new ownership. For those who are interested in the most effective means of accomplishing this task, they may want to talk to a Connecticut attorney who has extensive experience in contract law that deals with this issue and many others that business owners often encounter.