As Stephen Covey noted so adroitly, one of the keys to effectiveness is to “begin with the end in mind.” When it comes to a business, its founders should structure and run the business with a clear commitment to their ultimate goals—both for themselves and their business. This if often referred to “exit planning.”
As is often true, your failure to plan potentially benefits only one group of people—the lawyers who get to sort things out after-the-fact. So what kind of planning should you be doing?
The Wall Street Journal recently addressed this subject in an article titled “Breaking Up (With a Co-Founder) Is Hard to Do.”
The article focuses especially on the “when” and “how” of an exit strategy. The best time to address the issue is when the business is founded. And the best way to memorialize your exit strategy in the event of disability, retirement or death is through various legal documents which should be created when the business is founded. For example, a Limited Liability Company (LLC) can use the LLC Operating Agreement, while a corporation may use its Bylaws or various Shareholder Agreements.
One thing is certain: burying your head in the sand will not make this issue go away. For every business, an “exit” will be required one way or another. A little planning now can prevent an expensive mess for the lawyers to clean up later.