If you own an online business and don’t have a succession plan, it is time to put one in place. As an online business owner, succession planning should go hand-in-hand with putting together your estate plan; and, like your estate plan, your business succession plan should be both enduring and adaptable as circumstances change over time. If you do not have a business succession plan – or if you do but you haven’t dusted it off in a while – here are 10 tips to consider as you turn your eye toward the future:
10 Tips for Online Business Succession Planning
Tip #1: Take Stock.
What we mean by this is that the first step in business succession planning is to take the time and effort to get a complete picture of what your “business” actually is. Did you form a limited liability company (LLC) or corporation? Do you have partners or co-owners? If so, what percentage of the business do you own? What are the company’s primary assets? Who is responsible for what; and, perhaps most importantly, is your business at a stage where someone else could step in and do what you do?
Tip #2: Protect Your Online Business’s Intellectual Property.
As part of the process of taking stock, you will want to identify your business’s intellectual property. As an online business, your intellectual property – trademarks and copyrights in particular – could be some of your company’s most valuable assets. Registering your company’s trademarks and copyrights is important for a variety of reasons, not the least of which is establishing ownership and value for purposes of succession planning.
Read more about protecting your online business’s intellectual property:
- Understanding the types of intellectual property
- All about IP protection, monitoring, and enforcement
Tip #3: Choose Your Successor(s).
Of course, when it comes to succession planning, one of the most important steps is choosing your successor (or successors). This means both your successor(s) as to (i) ownership, and (ii) management and operation of the business. Importantly, these do not necessarily have to be the same person (or people).
For example, suppose you are a widow or widower and you have two adult children. One has worked in the business with you for years, but the other lives overseas and works in a completely unrelated field. Not only that, but she has affirmatively expressed that she has no interest in taking over the family business. This is an extremely common scenario, and one in which you may want to plan for your child who works in the business to take over as CEO while both children receive shares of ownership.
Another option in this scenario would be to leave entire business to your child who will take over, while leaving other assets to the child who lives overseas. There are various permutations of each of these options, and you will want to carefully weigh all of the options that are available during the business succession and estate planning process.
Tip #4: Talk to Your Family.
When it comes to business succession planning, it simply is not possible to make decisions in a vacuum. The last thing that you want is to leave your online business to someone who couldn’t care less about whether it succeeds or fails. This can lead to family discord, not to mention loss of the (potentially significant) value that you cultivated over the course of your time at the helm.
If you have a successor or successors in mind, you will need to talk to them to make sure that they are willing and able to step into your shoes. If your decision means that other family members will be excluded from the business, you will want to talk about this, as well. These can be challenging conversations, and we can assist you in preparing for productive discussions.
Tip #5: Establish a Timetable.
Your business succession plan needs to include a timetable. This does not necessarily mean that you have to specify a date on which you will retire from the business and your successor will take over (although this is an option); but, what it does mean is that you need to know more than just that the transition will happen “some day.” Implementing a business succession plan is not a flip-the-switch type of event. There will be training, relationship-building, and other aspects involved that will require you to have a reasonably concrete timetable in place.
Tip # 6: Set Your Successor Up for Success.
Following on Tip #5, you need to set your successor up for success. You have been running the business for how long? Even if you are transitioning to someone who has worked in the business by your side, there is inevitably going to be a learning curve involved in taking over control. Develop training materials, get your files organized, and consider a shadowing period that will allow your successor to really learn what it is like to run the business day-to-day. You may even want to consider planning for a consulting arrangement in which you advise your successor (for a fee) for a period after you retire.
Tip # 7: Consider Whether it is Time to Hire Help.
Planning for succession is also a good time to consider whether your business should take on employees or hire independent contractors or professional advisors. For example, if you have been managing the company’s books or doing the “legal work” on your own, it make be time to get professional help so that you (and your successor) can focus more of your time on management and growth.
Tip # 8: Plan for Contingencies.
Even the best-laid plans are prone to unexpected events. What if you get sick? Or seriously injured? Or worse? Your succession plan should take these contingencies into consideration (and this is a big reason why you need to prepare your succession plan now rather than later).
Tip # 9: Take care of the legal documentation.
Unfortunately, many small business owners fail to appreciate the importance of things like operating agreements, bylaws, and meeting minutes. But, the fact remains that these are important for a variety of reasons (one of the most important being protecting the shield of limited liability); and, when you transfer ownership and control of your online business, there is going to be paperwork involved. The succession planning process is a good time to make sure that your business’s legal documentation is in order and updated to account for the eventual transition.
Tip #10: Don’t Forget about Taxes.
Finally, your business is an asset, and when you transfer ownership – whether during your lifetime or as part of your estate plan – there are going to be tax implications. Your plan should take these implications into account in order to minimize you and your successor(s)’ tax obligations as much as possible.
Jiah Kim & Associates | Experienced Advice for Online Business Succession Planning
If you are an online business owner and would like more information about succession planning, contact Jiah Kim & Associates to request an initial consultation. We work with online business owners in the US and all over the world, including many expats and digital nomads. To speak with an experienced attorney about protecting your business and your family, give us a call at (646) 389-5065 or get in touch with us online today.
This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.