There are several reasons why someone would leave a company, and business owners need to plan for the day when its owners may no longer control it. A company’s owners may leave due to death, illness or retirement in addition to various other voluntary or involuntary departures from the company. Although it may be impossible to predict when and why key members of the organization may leave, it is never too early to start planning for that eventuality.
Business owners need to ask themselves some questions regarding their partners when creating a succession plan. These questions force a company owner to contemplate what would happen to that person’s share of the business and how it may impact the structure of the company itself. Finally, business owners should think about what impact such a departure may have on employees and others connected to the organization.
Purchasing insurance may be part of a prudent succession planning as well as instituting rules for how shares may be sold and how to value those shares. This can come in handy if a co-owner passes away suddenly or leaves suddenly to spend more time with family or pursue other goals. Preparing a buy-sell agreement ahead of time can prevent undue stress and uncertainty when one of the owners decides to no longer be associated with the business.
Prospective entrepreneurs need to consider what would happen if a key employee or owner were to leave the planned business. This may be an issue that should be discussed with an attorney during the formation stage of the start-up company. A comprehensive buy-sell agreement may allow the process to be conducted in a smooth manner that may keep the business intact.