Business Succession Planning: Common Mistakes Made By Business Owners

November 10, 2011 by · Leave a Comment 

By Adil Daudi, Esq.

Despite having millions of small business operating in the United States, many of those small-business owners don’t have the faintest idea on how to formulate a proper business succession plan. This has easily become one of the major concerns of many owners; how to coordinate a proper transfer of their business to the next generation, or to their estate.

Taking the proper measures to ensure a smooth transition is vital for every business, however it is also commonly overlooked, or more often than not, it is commonly misapplied. The following are the four (4) most common mistakes business owners make when attempting to create a succession plan.

1. Failing to plan is planning to fail: Failure to plan: One of the primary reasons why many fail to have a plan is because of laziness. Most do not consider it important enough to take the time to complete. However, the effects of non-planning will prove to be burdensome when it comes time to retire, or upon your death. Take the time to sit down with a professional and discuss your options – it can even possibly save you money down the road.

2. Failing to incorporate the Estate and Business plan together: A common misconception with owners is that upon their demise, they feel the assets owned under the company would automatically be distributed to their surviving spouse. Although that may have been the wishes of the deceased, that is not how it works in reality. A carefully drafted business succession plan would include such concerns and ensure the wishes of the owner are fulfilled.

3. Failing to appraise the business: Similar to knowing the value of your home, it is just as important to know the value of your business. This is especially true if your succession plan involves the sale of your business, or if it is passing to your heirs, as the value would need to be noted for estate tax purposes.

4. Failing to create an Estate Plan: No business succession plan can be complete without having a proper estate plan. If it is your intent to have the funds of the company transferred to your heirs, the most efficient manner for it to occur is through your estate (i.e. Revocable Living Trust). Furthermore, it is equally important to have a contingent plan in place in the event you become disabled or unable to manage your business and/or financial affairs. Who would run the businesses, or make the decisions? Establishing a Power of Attorney to handle these affairs is necessary for your company to continue its operations.

It is widely acknowledged that business owners have a busy, compact, and hectic schedule. However, by not taking the proper steps of setting up an effective succession plan, business owners are simply hurting themselves personally, the business, and their heirs. Proper planning can take a few hours of an owner’s time, but it can save years of headaches afterwards. Always be sure to consult with a trusted professional who can assist and guide you through the process, and be better able to meet the goals you set out for your business.

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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What Holbrooke Knew

May 19, 2011 by · Leave a Comment 

By Nicholas D. Kristof

US AfghanistanWhen he was alive, Ambassador Richard Holbrooke was effectively gagged, unable to comment on what he saw as missteps of the Obama administration that he served. But as we face a crisis in Pakistan after the killing of Osama bin Laden, it’s worth listening to Holbrooke’s counsel — from beyond the grave.

As one of America’s finest strategic thinkers and special envoy to the Af-Pak region, Holbrooke represented the administration — but also chafed at aspects of the White House approach. In particular, he winced at the overreliance on military force, for it reminded him of Vietnam.

“There are structural similarities between Afghanistan and Vietnam,” he noted, in scattered reflections now in the hands of his widow, Kati Marton.

“He thought that this could become Obama’s Vietnam,” Marton recalled. “Some of the conversations in the Situation Room reminded him of conversations in the Johnson White House. When he raised that, Obama didn’t want to hear it.”

Because he was fiercely loyal to his friend Hillary Clinton, the secretary of state, Holbrooke bit his lip and kept quiet in public. But he died in December, and Marton and some of his friends (me included) believe it’s time to lift the cone of silence and share his private views. At this time, with Pakistan relations in a crisis and Afghanistan under review, our country could use a dose of his wisdom.

Holbrooke opposed the military “surge” in Afghanistan and would see the demise of Bin Laden as an opportunity to go into diplomatic overdrive. He believed strongly that the only way out of the mess in Afghanistan was a peace deal with the Taliban, and his team was secretly engaged in outreach to figures linked to the Taliban, Marton says.

“Reconciliation — that was what he was working toward in Afghanistan, and building up the civilian and political side that had been swamped by the military,” Marton recalled. “The whole policy was off-kilter, way too militarized. Richard never thought that this war could be won on the battlefield.”

His aim, she says, was something like the Balkan peace agreement he negotiated at a military base in Dayton, Ohio. The process would be led by the United States but include all the regional players, including Pakistan and Iran.

“He was dreaming of a Dayton-like setting somewhere, isolated, no media, no Washington bureaucracy,” Marton said. “He was a long way from that, but he was dreaming of that.”

Vali Nasr, a member of Holbrooke’s team at the State Department, puts it this way: “He understood from his experience that every conflict has to end at the negotiating table.”

Nasr says that Holbrooke’s aim for Afghanistan was “not cut-and-run, but a viable, lasting solution” to end the civil war there. If Holbrooke were still alive, Nasr says, he would be shuttling frantically between Islamabad and Kabul, trying to take advantage of Bin Laden’s killing to lay the groundwork for a peace process.

To do that, though, we have to put diplomacy and development — and not 100,000 troops, costing $10 billion a month — at the heart of our Afghan policy. Holbrooke was bemused that he would arrive at a meeting in a taxi, while Gen. David Petraeus would arrive escorted by what seemed a battalion of aides. And Holbrooke would flinch when Petraeus would warmly refer to him as his “wingman” — meaning it as a huge compliment — rather than seeing military force as the adjunct to diplomacy.

As for Pakistan, Holbrooke told me and others that because of its size and nuclear weaponry, it was center stage; Afghanistan was a sideshow.

“A stable Afghanistan is not essential; a stable Pakistan is essential,” he noted, in the musings he left behind. He believed that a crucial step to reducing radicalism in Pakistan was to ease the Kashmir dispute with India, and he favored more pressure on India to achieve that.

Holbrooke was frustrated by Islamabad’s duplicity. But he also realized that Pakistan sheltered the Afghan Taliban because it distrusted the United States, particularly after the United States walked away in 1989 after the Soviet pullout from Afghanistan. And renewed threats of abandonment won’t build trust.

Rather, Holbrooke poured his soul into building a relationship not only with Pakistani generals but also with the Pakistani people, and there were modest dividends. He helped improve C.I.A. access to Pakistan, which may have helped with the raid on the Bin Laden compound. And he soothed opposition to drone attacks, Nasr noted.

“He was treating them as a serious player, not as if you’re just having a one-night stand but as if there might actually be marriage at the end of the relationship,” Marton said.

It’s a vision of painstaking diplomacy toward a strategic goal — peace — and it’s what we need more of. President Obama said wonderful things at the memorial service for Holbrooke. But the best tribute would be to listen to his advice.

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