Pre-planned business succession of leadership and ownership is one of the most important aspects of the organization of any business. If it is overlooked, it can have disastrous consequences upon the death or incapacity of the business founder, such as costly and distracting litigation between competing interests, often leading to the ultimate failure of the entire business.
It seems that many business owners overlook this important aspect of business organization either because they are young when they start the business and just are not thinking about succession, or because of the very human reluctance to avoid facing our ultimate mortality.
We strongly advise all of our business clients to include both a leadership and an ownership succession plan in the body of the corporate bylaws or LLC operating agreement, or in a separate shareholders’ agreement that sets out that succession details of how leadership and ownership will pass from one set of leaders and owners to the next.