FOR YOUR PRACTICE | NUTS & BOLTS
Five Nightmare Scenarios: What Can Go Wrong with Business Succession in Estate Planning BY PATRICK M. KLEMZ, ESQ.
IN THE FINAL SEASON OF the HBO series
Succession, family drama ensues when someone finds an undated will signed by conservative news mogul and patriarch Logan Roy, naming his son Kendall as the CEO upon Logan’s death. Obviously, this is fantasy. Dated or undated, a will has no direct legal bearing on who has the authority to run a corporation. While probate could shift the balance of stock ownership in time, nothing would change immediately. The owners of the controlling interest directly, or indirectly through a board of directors, appoint the new manager of the business. The mundane truth is that public corporations have comprehensively documented succession plans and procedures, leaving no room for HBO-style drama, and closely held businesses often have no plan at all. This is backwards. Managing owners of a closely held business have more reason, not less, to plan for their own demise and incapacity because the ownership base, like the shareholders in a public corporation, may not be organized or informed enough to act. Below are five business disasters that can unfold when the manager of a closely held business dies having failed to plan for their succession.
94
MSBA.ORG | VOLUME 7 ISSUE 3