My book, “The Lawyer’s Guide to Family Business Succession Planning: A Step-by-Step Approach for Lawyers, Business Owners, and Advisors,” is now available from the publisher, the American Bar Association, Business Law Section. Here is the link: https://www.americanbar.org/products/inv/book/401507619/. This post describes the book’s purpose, summarizes the book’s content, and provides guidance on how the book can help.
What is the book’s purpose?
The book is a step-by-step manual on how to develop and implement a plan for the succession of ownership and management of a family-owned business. It focuses primarily on succession within the family, but the book also provides instruction for succession planning in the context of uncertainty about whether the business will remain in the family.
The book has several guiding principles:
First, the key to sustaining a family-owned business after transition to the next generation is developing a governance structure that will be best suited to serve the new ownership group.
Second—and obvious from the first point—family business succession planning involves much more than simply avoiding probate and reducing estate taxes.
Third, the family business succession planning process can yield immediate economic benefits for the business and its owners, including greater tax efficiencies, new opportunities arising out of an enhanced governing or advisory board, and more productive uses of non-business assets.
Finally, the senior owners should have a viable and secure economic plan for retirement before they engage in aggressive transfers of family business equity or other wealth to the next generation.
What is the book’s content?
The book is written in a straightforward, instructional style. It is pithy, not chatty. It includes brief examples, but no anecdotes or case studies. It is written for busy people who are reading at their desk, not on a beach.
The first chapter is an overview of the material. The rest of the chapters focus on particular tasks in sequential order. Each chapter is organized as an outline, with section headings and subsection headings. The paragraphs are short and to the point. The book has appendices that can be used as outlines or checklists for the planning process.
The substantive chapters address the following subjects:
● The lawyer’s role and duties in representing the business and the owners, including potential conflicts of interest.
● Business valuation, including objective economic value and the subjective value to the owners’ successors.
● Business continuation planning to prevent a loss of value if a senior generation owner is incapacitated or dies before the succession plan can be completed or implemented.
● Business restructuring to capture tax efficiencies and facilitate succession planning mechanisms and results that are tailored to the family’s circumstances and objectives.
● Establishing governance structures and ownership rights that will be most appropriate and effective during and after transition of ownership to the next generation.
● Key contracts, including contracts with family members and contracts with third parties that might affect or be affected by ownership succession.
● Senior owners’ estate planning, to ensure that the estate plan is consistent with, and specific about, the succession plan.
● Senior owners’ retirement planning, to ensure that they will be financially secure after they exit the business.
● Lifetime wealth transfers, particularly involving tax efficient means of transferring ownership interests consistent with the succession plan.
How can the book help?
The book is written primarily from a lawyer’s perspective, and it will be particularly helpful to lawyers, but the book also can provide guidance and insight to business owners and their other advisors about how to work with the lawyer to develop a thorough and effective family business succession plan.
The book explicitly encourages the lawyer to collaborate with the clients’ other advisors, particularly their accountants and investment advisors. This book can help those other advisors improve succession planning by adding ideas and refinements from their own areas of expertise. Generally, the clients’ lawyer and accountant will produce a better succession plan working together than the lawyer working alone. Similarly, the timely advice of investment advisors, valuation professionals, insurance advisors, and other financial service providers can produce a better plan.
The book also will help family business owners be better prepared to work on each step of the succession planning process. The book is in the nature of a technical manual, but I have tried to explain the technical concepts in terms that business owners and other lay people can understand.
I have created this blog as a place where I can further explain concepts in the book. I encourage business owners who read the book to send me any questions they may have, and I will try to answer those questions in this blog (without identifying who asked the question, except with permission). Please send your questions to me at firstname.lastname@example.org, and include the words “Question for Monday’s Blog” in the subject line.
If the book helps family businesses thrive and contributes to the quality of life for the owners and their families, it will serve its ultimate purpose.