Many circumstances may arise when it is necessary to pass on ownership of a business from one individual to another. In some cases, the business may become a larger operation than the owner wants to handle on their own. Other times, an owner may want to retire and pass the torch or may suddenly pass away. In any case, having an effective management succession plan in place can help with the efficient and successful transitioning from one owner to another.
Selecting a Successor
Surprisingly, too many business owners do not consider the abilities of their successor carefully enough. Just because you have worked for someone for a long time does not necessarily mean they will be the best choice to manage the entire operation. Instead, you should conduct a thorough search for the best candidate possible – who may be inside or outside your organization.
In addition, if you have a closely-held or family-managed business, you may feel pressure to choose your oldest child or someone else based on apparent seniority. However, someone else in the family may be more capable and willing of taking on management responsibilities so you should not feel limited in your choices based on family pressures.
Have a Written Plan
Managing a business requires more tasks, responsibilities, and knowledge than you may even actively realize. Therefore, transitioning power can be a complicated process. It is always wise to have a plan set out in writing to ensure that successful operations will continue as the transition occurs. Often, a management succession plan is included in an operating agreement drafted at the formation of the business. However, even if you do not have a succession plan in place, you should realize it is never too late to update your operating agreement to include succession plans.
Too many companies – especially smaller ones – fail in times of transition. However, with some careful planning with the help of an experienced business attorney, you can preserve your hard work and ensure that your company will continue after your management duties cease.
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If you would like to discuss the preparation of a management succession plan, please do not hesitate to contact the law office of Bowne Barry & Barry in New Jersey today. Our attorneys can help with every aspect of your business – from formation to handing over management responsibilities to someone else. Please contact us for more information about our services today.