Startup companies have unique challenges, but succession planning is one area that both startups and well-established businesses should likewise be considering. No matter the stage of your business, the time to start thinking about succession planning is now. For those with a well-established business, you have worked hard to get the business to where it is today. If you suddenly become injured, sick, or pass away, who would take over the business? You certainly have an idea of what you would want to happen to the company, but if that idea isn’t appropriately documented and planned for, it is of little help.
For startup companies, a succession plan is just as important, if not more important than for an established business. Similarly to established businesses, you have put in a lot of time and effort to get the company off the ground. Your time and insight may very well be the most important asset of the company, but you may have someone else involved in the business as well. If you were unable to work for a short time, would you want the company to fail? Or would you prefer someone be able to at least keep the company going? Say the company had just reached a major breakthrough or just received a large amount of funding, wouldn't you want to see the business continue the work you had started?
As business owners know, a company doesn't rung itself, and not everyone is cut out to run a business. So why leave the continuation of the business to chance when you can make a succession plan setting forth a detailed plan. Some things to consider in creating a succession plan:
- If something happens to you so that you cannot work for a short time, who could take over the business? How would bills get paid as due? If email communication is heavily relied on, can someone access that email account?
- If you were to die, should the business continue or be wrapped up? If it is to be wrapped up, who is capable of doing so? If it is to be continued, by whom?
- Do you have a will or other appropriate estate planning document to appropriately transfer ownership? Do the company documents address the possibility of a surviving spouse or surviving children succeeding to the ownership interest of a deceased owner? Could a creditor of the owner take over his ownership interest?
Every business will have different answers to these questions, but all business owners, startups included, should be asking the questions.