Small Business Asset Protection and Succession Planning

For every small business owner, two of the most crucial concerns are protecting business and personal assets and planning for long-term continuity and stability of the business. A business law attorney helps a small business owner address both types of concerns by guiding the owner through making sound decisions for asset protection and business succession planning.

Asset Protection for a Small Business

The most important aspect of asset protection for a small business relates to choosing the right legal structure for the business. This decision should be made and implemented early in the life of the business and may be reviewed as the business expands and grows. The business structure can be established or changed at any time, but the protection provided by a specific business structure is not effective until the entity choice is implemented.

For many small businesses, a Limited Liability Company (LLC) is an excellent choice for the legal structure. An LLC provides liability protection for a business owner that some other structure types do not. The personal assets of an LLC member (the term for an LLC owner) cannot be reached by creditors in most circumstances. An LLC member also is not responsible for business debts. Choosing an LLC as the legal structure for a small business has additional benefits relating to taxation, which can preserve and protect assets.

One element of asset protection that small business owners may overlook is the importance of the right insurance to safeguard assets against potential liability. Addressing business insurance needs is one of the priorities that an owner should address early in the life of the business. The needs of a specific company depend on the nature and structure of the business. An experienced business law attorney can help a new small business owner make an objective assessment of the insurance needs of their company.

Succession Planning for a Small Business

While asset protection is a present, ongoing concern for a small business owner, succession planning is a process that provides a detailed plan for future continuity if the owner leaves the business, whether the departure is foreseen or unforeseen. Among other important issues, the plan often addresses transfer of company ownership.

Developing the right business succession strategy is crucial for every small business, including a family business, which may not be able to survive in the absence of a thoughtful succession plan. An effective, complete business succession plan ensures the longevity of the company and also minimizes the costs and disruptions of the business transfer. The business succession plan is an important part of the owner’s estate plan.

Without a business succession plan, a small business faces many risks. Transitioning from one owner to another without a plan can result in diminution of the value of the business through loss of valuable relationships developed by the original owner. The loss of trust can extend to clients, customers, employees, investors, and others, who will go elsewhere to address their needs. In addition, loss of experienced and skilled employees and managers can result in a significant loss of resources. Finally, if competitors become aware of the lack of a succession plan, they can develop plans to seize market share from the business.

If a business owner departs without a plan in place, the absence of leadership and decision-making authority often creates a significant potential for conflict. As a result, mistakes may be made in rushing to fill the gaps, which exacerbates all of the risks to continuation of the business.

A business succession plan may address two types of planning: long-term and emergency. The long-term plan frequently includes a detailed strategy for identifying and developing talent and preparing specific people to transition into leadership roles. Buy-sell arrangements that transfer ownership, such as to co-owners or the business entity, may be part of a longer-term plan as well. An emergency plan may provide for interim measures and ownership transfer, to allow time for development of longer-term plans.

Securing the Future of a Small Business

Maximizing protection of assets and planning for the future of the business are two top priorities that every small business owner should address. The best approach for navigating these critical concerns is to get assistance from a knowledgeable business law attorney in setting up your business and running it on an ongoing basis.

In serving our business law clients at Peterson Law Offices, we help owners set up a new business and then provide legal counsel for ongoing operations and succession planning. If you own a small or mid-size business, establishing a working relationship with us enables you to have an experienced business law attorney on call whenever you need help with a legal concern.

Schedule Your Free Consultation With a Trusted East Valley Business Planning Attorney

At Peterson Law Offices, we provide high-quality business law services at affordable prices. We welcome inquiries from business owners throughout the East Valley, including Queen Creek, San Tan Valley, Gilbert, Mesa, and Chandler. Schedule a free initial consultation by calling 480-878-5998 or using our online contact form.