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Things To Keep In Mind With Business Succession Planning

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The succession planning process is an important step at some point in the development of any business. It can help ensure the continuity of a business and protect its assets. Succession planning should be a part of every business’s plan, regardless of size or industry. Here are some tips to help you develop a successful succession plan.

1. Have a Plan

One of the most important aspects of successful business succession planning is simply creating and having a plan. A plan provides a road map for the transition process, outlining who will take on which roles and responsibilities and when specific tasks need to be accomplished.

Having a plan also helps ensure that all stakeholders are aware of their roles and responsibilities during the transition and that everyone is working towards the same goal. Additionally, a plan can help manage expectations and avoid conflict among stakeholders.

2. Choose the Right Successor

The selection of a successor is important in business succession planning because the wrong decision can have disastrous consequences for the company. The successor needs to be someone who is capable of taking over the company and continuing its operations.

They also need to be someone who is compatible with the company’s culture and values. If the successor is not a good fit, it can lead to tension within the company and decreased productivity.

3. Train Your Successor

The purpose of training your successor is twofold. First, it ensures that the transition of power is as smooth as possible, minimizing any disruption to the business. Second, it allows the successor to learn and understand the business inside and out, so that they can continue to operate it effectively after you retire or die. This is especially important in family businesses, where the successor may not have previous experience working in a business setting.

4. Get Professional Help

There are a few reasons why getting professional help is important in business succession planning. One reason is that it can be difficult to know how to start the process or what to do next. A professional can help you navigate these waters and ensure that everything is done correctly. Additionally, a professional can help you develop a plan that takes into account all of the relevant factors, such as tax implications and stakeholder preferences.

5. Create a Possible Timeline

Creating a possible timeline for the succession planning process is important because it allows for a smooth and organized transfer of power from the current owner or CEO to the designated successor.

By mapping out the steps that will need to be taken and the timeframe in which they will need to be completed, both the current owner/CEO and the potential successor can have a clear picture of what needs to happen and when. This can help to minimize confusion and disruption during what can be a potentially tumultuous time.

6. Document Your Plan

Documenting your plan and reviewing with your leadership team is important in business succession planning because it provides a road map for transferring ownership and operations of the business to the next generation of leaders. Without a documented plan, it can be difficult to ensure a smooth transition of ownership and operations. A documented plan can also help to ensure that the business is able to continue operating in the event that something happens to the current owner or leaders.

7. Review and Update Your Plan Periodically

The process of reviewing and updating your plan on a consistent basis is important in order to ensure that your succession plan remains effective. By periodically revisiting your plan, you can identify any changes that may have occurred in your business or personal life that could impact your succession plan. You can also make any necessary adjustments to ensure that your plan still meets your needs.

8. Don’t Forget To Update Your Estate Plan As Well

One’s estate plan should include a succession plan, which details who will take over management of the individual’s assets and affairs, as well as business, in the event of incapacity or death. The two documents should be coordinated to ensure that the desired outcome is achieved. For example, if one wishes to leave specific assets, or business(es) to some individual(s), those individuals need to be named in both the estate plan and the succession plan.

Contact Our Raleigh Business Succession Law Firm

Most importantly, in business succession planning, it is important to work with a skilled attorney because they can help ensure that the process is smooth and that all of the necessary steps are taken in order to transfer ownership of the business to the desired party. An attorney can also help create a will or trust to help direct the succession process. Without an attorney, it can be difficult to ensure that everything is done correctly and that the transition goes as smoothly as possible.

If you are in need of assistance with succession planning, contact our North Carolina succession planning attorneys at Wilson Ratledge today to schedule a consultation and help reduce the stress and uncertainty of creating a business succession plan.

Frances M. Clement to Speak at 2022 NCPRIMA

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The 2022 North Carolina Public Risk Management Association’s Annual Educational Conference will be held in Wrightsville Beach, September 11, 2022 through September 14, 2022.  Attorney Frances M. Clement, along with Henry Smith of Fayetteville Public Works Commission, will speak before other professionals on “Drugs, Lies & Dollar Bills:  A Breakdown of the Intoxication Defense, Misrepresentation Defense, and Penalties for Safety Violations”.

Navigating the Challenges That Are Often Associated With Estate Taxes

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The estate tax in North Carolina is a levy on the assets of a deceased person. In most cases, the tax applies to the balance of an individual’s estate after outstanding debts and final expenses are paid. The estate tax can be a major financial burden for heirs, who may need to sell assets or take out loans to pay the tax bill. In many cases, family members must delay distributions from an estate in order to cover the cost of the tax. 

In many cases, the tax is unavoidable and can lead to difficult decisions about how to dispose of a loved one’s estate. Here are some tips on navigating the challenges that are often associated with estate taxes in North Carolina.

How Much Are Estate Taxes?

In North Carolina, the estate tax was eliminated in 2013. So, you do not owe any estate taxes to the state. You do, however, need to pay some taxes to the federal government if the estate is valued at over $12.06 million. While this value is often adjusted for inflation every year, the federal estate tax exemption is $12.06 million in 2022. The tax rate is about 40%. 

However, there are some exemptions from the federal estate tax, for example, if the estate was given as a gift during the estate owner’s lifetime or if the estate was placed under the care of a trust. These are aspects of estate planning that might need to be discussed with an estate planning attorney. The attorney can help you to develop a strategy that best suits your needs.

Reducing Liability for Estate Taxes

As we just mentioned above, individuals looking to reduce their liability for estate taxes may want to consider creating a trust. A trust can be used to hold property. This will not only reduce the taxable estate, but the trust will also help to manage the property and any income it generates in a tax-efficient manner. Trusts can also help protect assets from legal judgments and creditors. In addition, trusts can be used to provide for beneficiaries in the event of the settlor’s death.

Gifting property is also another way that can help reduce the amount of federal estate tax owed on a person’s estate after they die. The IRS allows individuals to give away some amount without having to pay any gift taxes. This amount is known as the “exclusion amount.” Gifts that exceed the exclusion amount are subject to a gift tax at a rate of up to 40%.

However, there are ways to give away more than the exclusion amount without having to pay the gift tax. One way is through a technique known as “gift splitting.” This allows spouses to split their combined gift exclusion amount between them. This means that each spouse can give away up to a bigger gift without having to pay any gift taxes.

Reviewing Beneficiary Designations

A beneficiary designation is a legal document that states who will receive your property after you die. It is important to review your beneficiary designations regularly to ensure that they reflect your current wishes. For example, if you have named someone as a beneficiary who is no longer alive, or if the property you want to leave to them has been sold, you will need to update your designation. Otherwise, your wishes may not be carried out after your death.

Planning Ahead To Minimize Estate Tax Liability

Estate taxes can be a significant burden on heirs, particularly if the estate is large. However, as you have seen, there are a number of action steps that can be taken to minimize or avoid estate tax liability. However, just knowing what to do is not enough, you need to take action.

One of the most important things you can do is to plan ahead. Start by reviewing your assets and liabilities and estimating the value of your estate. If you have a spouse or children, consider how they will be affected financially if something happens to you. 

Next, you take steps to make provisions for transferring ownership of assets to your loved ones during your lifetime or consider setting up a trust as a way to reduce your taxable estate. 

Minimizing estate tax liability is a complex subject, and it’s important to have an experienced team to help. Wilson Ratledge has helped numerous families create a plan that will minimize your estate tax liability and ensure that your loved ones are taken care of after you’re gone. Contact us today to schedule a consultation!

Common Structures For Business Exits In North Carolina

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When a business owner in North Carolina is ready to retire, sell, or wind down their business, they will need to choose the appropriate structure for the exit. There are a few common structures used for business exits in North Carolina. We will discuss them in this article. 

Each option has its own set of benefits and drawbacks, so it’s important to understand them all before making a decision. In any case, if you’re considering an exit strategy, it’s important to work with an experienced Raleigh business lawyer to set up the option you believe is best for you and your company and get you started.

Types of Business Exits in North Carolina

There are a number of different structures for business exits in North Carolina. They are listed and briefly discussed below.

1. Sale of the Company

The sale of a company as a business exit strategy is the process by which a company sells all or part of its operations and assets to another company. This means that they will find a buyer who is interested in purchasing the company’s assets and operations as a whole or in part. This can be a good option for the owners, as it can allow them to receive some money for their business and avoid having to close it down completely.

In most cases, the company will hire an attorney and a banker to help them find a buyer and negotiate the sale.

2. Management Buyout

A management buyout (MBO) is a type of business exit strategy in which the current managers of a company purchase the company from its previous owner(s). This can be done with or without the help of outside investors. 

MBOs are often used when the previous owner(s) wants to retire, when there needs to be a change in ownership, or when the company is facing financial difficulty.

3. Employee Stock Ownership Plans (ESOPs); Earnouts Based on Performance

ESOPs are employee-owned businesses in which employees are given company stock in order to give them a financial stake in the company. This can help to incentivize employees and make them feel more invested in the company’s success. An earnout is a payment made to an employee based on their individual performance. 

It can also be used as a business exit strategy, allowing the owner to compensate the most hardworking staff for handling company affairs when they are gone.

4. Going Public

When a company decides to go public, it is selling ownership stakes in the form of shares of stock to the investing public. This process allows a company to raise money by giving potential investors the chance to buy a piece of the company. The company will also be listed on a stock exchange, which will provide liquidity (the ability to sell shares when needed) and transparency (the ability to track the stock price and performance). 

In some cases, the company’s head will decide not to hold on to any shares of the company, and may thus make their exit in this way. In other cases, they may hold on to very few shares, which gives them very little control over any of the company’s activities.

5. Private Equity Buyouts

A private equity buyout is the acquisition of a company by a private equity firm. Private equity firms are firms that invest in companies that are not publicly traded on a stock exchange.

Private equity buyouts as a business exit strategy can involve a number of different steps in order to be successful. The first step is finding a private equity firm that is interested in buying the company. Once a private equity firm is found, the company will need to provide detailed financial information so that the private equity firm can perform due diligence on the company. If the private equity firm is interested in the company, they will make an offer to buy it.

7. Mergers & Acquisitions

A business founder can acquire an opportunity to exit from the business through mergers and acquisitions. The business can be acquired by another company that is interested in expanding its market share or that is looking for new products or services to offer its customers. 

The acquisition can also provide the previous business owner with the opportunity to receive financial compensation for its ownership stake in the company. This compensation can come in the form of cash, stock, or other assets.

8. Dissolution

The dissolution of a business can be used as an exit strategy for the owners or shareholders of the company. This process involves the legal termination of the business and the sale or distribution of its assets. 

The goal of this strategy is to provide a way for the owners to liquidate their interests in the company and receive cash or other assets in return. Dissolution is often used to terminate a business that is no longer viable or has run into financial troubles but may also be used simply as a business exit strategy.

Our Raleigh Business Law Firm Can Help

If you’re ready to take the next step in your life and are considering exiting your business, there’s a lot to consider. The experienced team at Wilson Ratledge has helped many business owners just like you find the best option to maximize the time and financial investments you’ve put in your company over the years. Contact us today to schedule a consultation and explore your options.

Kristine L. Prati to Speak at the NCADA’s 45th Annual Meeting

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The North Carolina Association of Defense Attorneys 45th Annual Meeting and 12th Biennial Judicial Candidates’ Forum will be held in Wilmington, June 16, 2022 through June 19, 2022.  Attorney Kristine L. Prati, 2021-2022 Vice-Chair of the Workers’ Compensation practice group of the NCADA, will speak before other professionals on “Futility” Cases In Workers’ Compensation.  Her session will provide a history of “futility” cases, the issues related to such cases, and lessons learned.

WC: Extended Benefits in North Carolina

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The North Carolina Industrial Commission recently issued decisions in the first round of extended benefits cases, in which claimants are arguing entitlement to temporary total disability benefits past the 500-week cap. On May 19, 2022, Attorneys Paul F. Toland and Kristine L. Prati attended the joint seminar offered by the NCADA and NCASI to learn more about the history of the legislation, analyze the cases decided to date, and explore strategies moving forward.  If you have questions about how this may impact your claim, or wish to discuss extended TTD benefits in North Carolina, contact them today to learn more!