Business Succession Planning in DeKalb County, Illinois

No company can survive without an able owner, executive, or shareholder at the helm. In the event of a key member’s sudden death, illness, or retirement, businesses are often left scrambling to recover lost assets and find a replacement. Large corporations and small family-owned businesses alike can avoid a tumultuous transition by creating a succession plan with a knowledgeable attorney — well before a crisis forces the issue.

At Krupp & Krupp LLP, we work with business owners throughout DeKalb County and Northern Illinois to create succession plans that reflect the goals of the business, the needs of the family, and the interests of employees and fellow shareholders. Because business succession planning intersects closely with estate planning, our firm is uniquely positioned to address both — ensuring your business transition plan and your personal estate plan work together seamlessly.

What Happens to a Business Without a Succession Plan?

If an owner, executive, or shareholder does not have a succession plan in place, his or her stake in the company is either passed on to relatives as part of the estate, absorbed by other shareholders, or a combination of the two. The results are often disruptive — and sometimes devastating.

In family-owned businesses, disputes may occur between siblings and other relatives. Those more active in the day-to-day operations of the business may feel entitled to larger shares than those who are less involved, creating conflict at an already difficult time.

In larger businesses, employees and clients may leave for fear of instability, shareholders may not be able to buy out the extra shares, and temporary replacements may not be equipped to lead the company through a delicate transition. If a spouse or other relative inherits the shares of a deceased owner without a clear plan in place, disputes among remaining shareholders can stall progress and lead to a significant loss of business value.

What Does a Business Succession Plan Include?

An attorney with expertise in business and estate planning can help owners and shareholders create a plan to ensure a smooth transition. Plans are customarily developed after consulting with employees, co-owners, other shareholders, and family members, and after clearly outlining goals for the future of the company.

Though succession planning can be tailored to fit any business model, it typically involves one of two primary approaches:

• Retention Planning — Keeping the business or shares within the family. With a retention plan, a spouse, children, or other relatives retain control of the business assets after the owner’s death, disability, or retirement. This approach works well for family-owned businesses where the next generation is prepared and willing to take over.
• Buy-Sell Retention Planning — Offering other shareholders or key employees the opportunity to acquire the departing owner’s interest. Interested parties named in the plan are granted a right of first refusal — the ability to accept or reject the shares before they are offered to outside parties. The price of the shares is determined by a valuation mechanism agreed upon during succession plan negotiations, such as prevailing full market value or multiple professional business appraisals.

Properly drafted succession plans give the remaining members of the company a clear procedure to follow if the unexpected happens. A good plan designates a competent successor, reassures employees about their job security, and puts safeguards in place to protect the company from loss. A pension or retirement fund may also be incorporated into the plan.

Other arrangements can transfer the owner’s or executive’s interest into trusts to be paid out to family members over time. In some cases, assets may be divided among employees, or it may be determined that selling the company is the best course of action. With so many factors to consider — legal, financial, and personal — it is important to work with an experienced business succession attorney who can understand all of the interests at stake and help you protect them.

How Business Succession Planning and Estate Planning Work Together

For many business owners, the business is their largest asset. That means a personal estate plan that doesn’t account for the business — and a business succession plan that doesn’t coordinate with the estate plan — can leave serious gaps. At Krupp & Krupp LLP, we routinely help DeKalb County business owners develop plans that address both their personal estate and their business transition together, using tools such as:

• Buy-sell agreements funded by life insurance to ensure the business can be purchased from a deceased owner’s estate without financial strain on the surviving owners
• Trusts that hold business interests and provide structured distributions to family members
• Powers of attorney that designate who manages business affairs if an owner becomes incapacitated
• Business valuation planning to minimize estate tax exposure on the transfer of business interests

If you own a business in DeKalb County or Northern Illinois and do not yet have a succession plan, the time to start is now — before retirement, illness, or an unexpected event forces the decision. Contact Krupp & Krupp LLP to schedule a consultation with one of our business succession planning attorneys.