Minneapolis Business Succession Planning Lawyers

Making Ownership Transitions Feel Seamless for Small Business Owners and Their Family Members

Part of being a business owner is planning for your company’s future, including what you will do if you retire or choose to sell the business. Before you consider leaving your company, you should hire a lawyer to help with this process. After all, the decision will likely affect many people, including your family, employees, and clients. This is why getting every detail right from the beginning to end is essential.

At Metropolitan Law Group, our business succession planning lawyers are experienced in helping business owners make significant changes in leadership. We understand how important your business is to you, so we’re here to help you preserve its legacy. Contact our Minneapolis law firm for a free consultation to learn more.

What Are Your Options for Transferring Business Ownership in Minneapolis, Minnesota?

Whether you are retiring, changing careers, or are just ready to hand off your role in leadership to another qualified person, our Minnesota business succession planning lawyers can help.

Over the years, our lawyers have guided business owners in selling or passing ownership to:

Heirs and family members.
Business partners.
Co-owners.
Employees.
Outside parties.

If you are considering selling or passing down your business to someone else, whether now or in the future, make an appointment to talk to our Minneapolis attorneys today. We can walk you through every step of the business succession process so you have peace of mind when it begins.

What is a Business Succession Plan?

Before you begin the transition of ownership, it’s recommended that you create a business succession plan that maps out the details. This business plan will make it clear to your employees that you have considered all factors regarding the transition and that you’re committed to the company’s long-term success even after you’re no longer involved.

You can include any details you find important to your company when creating a business succession plan. But in general, most plans of this kind answer these questions:

Is there a specific date or event after which you will transfer your business to someone else, such as if you retire or become disabled?
Who would you consider selling or passing down your business to?
What are the standard operating procedures that the new owner should know?
What method will you use to determine the value of the business?
How will the successor buy the business?

When you come to our law firm with questions about business succession planning, we can guide you as you create a plan, letting you know what details you may have missed and what guidelines Minnesota has in place. Contact our Minneapolis law offices today to get started.

What Are the Most Common Types of Business Succession Planning?

In general, there are two basic types of company succession planning to business owners in Minneapolis, Minnesota.

A death or accident business succession plan protects the company and the organizational structure in the event of the business owner’s unexpected death or incapacitation. This is an emergency business plan, one that is meant to go into effect if tragedy should ever unexpectedly strike. Without such a plan in place, it can be difficult to deal with business succession issues and family governance, especially with contested family-owned businesses. It is wise to draft a business succession plan that takes death or accidents into account, or else risk your company’s long-term health and your family’s goals. With a thorough business succession plan, your company can continue to operate regardless of the death or disability of the owner. Your death or accident business succession plan will establish a monetary value for the business and help avoid issues by working in coordination with estate plans. Most death and accident succession plans typically include buy-sell agreements, which are often funded by life insurance policies.

Another form of business succession planning is to develop an exit strategy for the current owner and the transfer of leadership to new owners. Exit succession plans monetize the company’s assets to meet the owner’s personal financial goals, provide some level of wealth protection, and help assist the company owner in the next phase of their life. Exit succession plans prepare both the company and its owner for the transfer of ownership and a specific date while putting in place various tools needed to transfer to new ownership effectively.

Our business succession lawyers have experience working with business appraisers, tax advisors, financial advisors, accountants, insurance professionals, and more in the pursuit of crafting successful business succession plans for our clients.

What Steps Go into Business Succession Plans for Family-Owned Businesses?

Business succession planning can be complex, and we recommend that you retain professional legal counsel throughout the process. Metropolitan Law Group’s estate and wealth planning attorneys have extensive experience guiding small businesses and family businesses through the process of creating a successful succession plan.

It is wisest to begin the process of creating a comprehensive succession plan as early as is reasonable. You may not have retirement in mind, but the unforeseen can always happen. Health concerns, sudden changes of heart, shifts in family dynamics, and other issues can occur, upsetting even the most carefully laid plans. Start early and update your plans often.

In many cases, the rightful successor to the leadership position of a small or family-owned business is abundantly clear. Perhaps you plan to pass on your business to the next generation or another family member, or maybe you expect your business partner to take over the controlling interests of the business. However, that is not always the case, as sometimes a successor has not been chosen. In such cases, you will need to evaluate the strengths and weaknesses of various candidates and choose the right successor for the job.

To ensure that many processes are smoothly transferred from the previous owner to the new owner, it is recommended that you formalize them by documenting your standard operating procedures. You should also include a written plan for the succession of the business to ensure that company records and documents are well-organized and easily accessible.

Next, it is important to establish the value of the business. This often requires an evaluation by a business appraiser or accountant. Alternatively, business owners could agree on the value of the business and how the purchase of ownership should be handled.

Finally, it is necessary to fund your succession plan. Most business succession plans are implemented via a buy-sell agreement funded by a life insurance policy. Buy-sell agreements may specify who is allowed to take ownership and management interests of the business, what should transpire if the owner is ever forced to retire early, how ownership interests will be handled in cases of divorce, and what shall happen if ownership is inherited after death.

What Method Will You Use to Transfer Ownership?

As you make a business succession plan, you should consider how the successor will purchase the business. One of the most common techniques is a purchase agreement, in which the person buying the company pays the current owner a fair amount based on the value of the business. This is usually the simplest option when there is one business owner.

When there are two or more owners, it may be easier for them to buy life insurance policies that are made payable to the other owners. This way, when one passes away, the surviving owner can use their life insurance payout to buy out the partner’s share after their death. A lawyer will help you decide if this is the optimal way to transfer ownership or if there is a better option for you.

How Can a Business Succession Planning Lawyer Assist You?

Whether you are thinking far ahead to the future and need to make a business succession plan now or are ready to sell your company soon, come to our Minneapolis law firm for legal guidance. Our lawyers can help determine the right way to transfer ownership and calculate your company’s value, and we can answer any questions you have while creating a business succession plan.

If you are ready to start preparing for the day you sell your business, come to Metropolitan Law Group for legal support. Contact us at 612-448-9653 to set up an initial consultation with our lawyers.

What Risks Do Family Businesses Face if They Do Not Have a Succession Plan in Place?

By knowing the risks, you can hopefully work to avoid them. There are many risks inherent in business ownership when succession plans are not created or properly implemented.

Common risks include the following:

The value of the business may diminish after the retirement or death of the owner.
It may take a long time to recover from a loss of trust felt by long-time clients, employees, investors, and customers after a sudden change in ownership.
Skilled and experienced employees may look into opportunities elsewhere if they feel they have no chance of advancement.
Failure to plan for business succession could result in hostile takeovers by competitors.
Without a proper business plan, there is the potential for conflict among partners and family members.
Failure to implement a business succession plan may result in rushed decisions to fill leadership roles, potentially resulting in unqualified leaders.

How is the Worth of the Business Determined?

Once a business successor has been selected, the business must be evaluated to determine its worth.

The state of Minnesota uses the ‘fair market value’ standard to determine the value of businesses. Minnesota courts use an eight-factor test to help determine a company’s fair market value. Among the factors included in this test are potential earnings, the economic outlook for the business, and the nature and history of the business.

Outside of the courtroom setting, a certified public accountant may weigh in using similar factors to determine the worth of a business.

Would You Benefit from Our Business Succession Planning Services?

Business succession planning is essential for expected and unexpected events and changes in circumstances. A sudden change in leadership may be caused by a family emergency, disability, death, or other causes.

Metropolitan Law Group provides comprehensive business succession planning services to our Minneapolis clients. These legal matters can be complicated, with even the smallest errors resulting in costly litigation and family feuds. To reduce the chances of conflict and help preserve your assets, it is recommended that you work with knowledgeable business succession plan attorneys. Our experienced team would be proud to represent your interests in the creation or modification of a business succession plan.

Schedule a Free Case Evaluation to Discuss Creating a Successful Business Succession Plan Today

Whether you are planning to retire or are simply wisely planning for the future of your business and whatever unexpected occurrences may transpire, it is highly recommended that you work with experienced attorneys for legal guidance. At our law firm, our legal team has years of combined experience assisting clients with the formation of business succession plans, and we would be proud to help you do the same.

Schedule your free, no-obligation case evaluation with our law firm today. You may contact us at ‭866-902-6148‬