Whether your Texas business is just starting out or you have worked for decades to build a strong reputation in your industry, you likely have great plans for the future. Perhaps you have ideas for expansion, or you may simply want to establish a successful company that will support your family and provide something you can pass on to your children.
If creating a legacy from your business is in your plans, you should know that this does not happen automatically. In fact, it might behoove you to understand exactly what may happen to your small business if you should become incapacitated or pass away before you have a transition plan in place.
Don’t leave a mess behind
A sole proprietorship is a business that has a single owner. You own your business and oversee its daily operations. You may have employees, but the ownership of the operation rests solely on your shoulders. In fact, in many respects, you are the business. If you should die, your business may die with you. If this is not your wish, it is not too early to take steps to protect the future of your company by creating a succession plan. Failing to do this may leave your loved ones with the following challenges:
- Gathering the documentation, licensing information and permits for your business
- Examining existing contracts with clients or vendors
- Trying to understand your business plan
- Tracking down your bank statements
- Pouring over your recent balance sheets
- Reviewing insurance policies
- Dealing with customers and clients who may feel nervous about their stake in the company
- Coaxing employees to stay when they fear for the stability of their jobs
- Evaluating the feasibility of taking over the business
This may be just the beginning. If you have not taken the time to bring your chosen successor into the loop of how your business runs, your heir may have a difficult time assessing the value of your hard work and fitting it into his or her own life. Your heir may have to make painful decisions, such as bringing on a partner to help with the financial or day-to-day management or opting to dissolve the business altogether.
Since your heir will take on the responsibility of your company’s debts, licensing and other factors, you would be wise to start early preparing your business and your heir for a smooth transition. Whether you have a retirement date in mind or you plan to work as long as you can, you can gain peace of mind by having a succession plan prepared with the help of a skilled attorney.