If you own and operate a business in Texas, it is important to the future of your company and possibly the livelihood of your heirs to write up a sound success plan. According to FitSmallBusiness, a succession plan makes it clear who will take over your business in the event of a triggering event. For many people, the triggering event is retirement, but for some, the triggering event may be divorce, monetary loss or disability. In addition to identifying someone to take over your business, your succession plan can also reduce potential disputes between parties and alleviate stress when a triggering event does occur.

According to FitSmallBusiness, there are five common ways you can transfer the ownership of your business to someone else. Those are as follows:

  • Sell to a co-owner
  • Pass ownership interests to a loved one
  • Sell your business to an outside party
  • Sell your business to a key employee
  • Sell your interest back to the company

There are pros and cons to each method. For instance, selling shares to a co-owner can ease the burden of the transition for the company and your family members alike. The agreement would ensure your loved ones get fair compensation for your share of the business and that the remaining owner or owners maintain control of the company. A drawback of this arrangement may include your co-owners lacking the cash necessary to purchase your interests.

If you share the same sentiments as many business owners, you imagine your children one day taking over your business. To ensure this happens, you may select one or all of your children to be your successors. While doing this guarantees your business stays in the family, it could cause significant conflict between your loved ones and between your loved ones and the remaining business owners. Before you select an heir as a successor, ask yourself if an inheritance is really the best idea.

If you do not have a co-owner or heir to sell to, you may consider selling your shares to an employee or third party. The problem with electing an employee is that he or she will likely not have the funds necessary to support the purchase. The problem with selling to a third party is that the third party may substantially change the way the business operates, which may or may not be a good thing.

If your business operates with two or more owners, you may consider selling your shares back to the company. The company as a whole may be in a more secure financial position to purchase your shares than a single owner would.

This article is for learning purposes only. You should not use it as legal advice.