Can your corporate lawyer assist with your exit planning efforts? Perhaps. Does your corporate lawyer have experience collaborating with other professional advisors and working with privately held business owners on the various issues involved in the exit planning process?
I wanted to find out why business owners should have a lawyer on their exit planning advisor team, in particular to understand: a) how to select an appropriate lawyer; and b) what the lawyer’s contributions to the exit planning process will be.
In order to do so I sat down with David Shlagbaum and Errol Tenenbaum at Robins Appleby & Taub LLP www.robinsapplebyandtaub.com in Toronto, Ontario. As Senior Partner with the firm’s corporate law team, David holds a Certificate in Family Business Advising awarded by the Family Firm Institute. His practice is devoted to business law, advising businesses on organizational structures and a broad range of transactional and contractual matters. David has a particular focus on guiding family owned businesses and entrepreneurs through the transition planning process. As an Associate with the firm’s tax law team, Errol’s practice focuses on the needs of family-owned and closely-held businesses, specifically in the areas of taxation and estate & succession planning. These are precisely the skill sets and experience you need in a lawyer on your exit planning advisor team.
According to David and Errol, the 4 key issues a business owner should be aware of when turning to a lawyer for exit planning advice include:
- The Process Guide - Exit planning is a process and the business owner guides the process. A good lawyer (and other professional advisors for that matter) recognizes this and seeks first to understand the client’s current situation (e.g. the personal, business and family goals, the desired outcome, the preferred exit option, the current value of the business, the required net proceeds to meet goals, etc.) before providing any advice;
- The Tax Implications – Having identified relevant exit options (e.g. third party sale, shareholder or management buyout, redemption of shares over time, etc.), the lawyer can advise on the tax implications in order to quantify the net proceeds and identify any gaps between the current situation and what is required to meet the goals. A common goal is to ensure the plan is structured in the most tax favorable way (i.e. minimize the taxes on immediate proceeds);
- The What-Ifs - The lawyer can assist with various sensitivity analyses to ensure there is an effective strategy in place for protecting business value and family wealth. What if an unsolicited offer is received? What if there is a family death, disability, divorce or dispute? Having a contingency plan, including a will and well crafted shareholders agreement, can assist in this regard by removing potential sources of family/shareholder conflict and being prepared for an involuntary exit; and
- Running The Business - Whether you plan to sell your business to a third party or transfer it to the next generation or an employee/management group, you should run your business "as if it’s for sale". This requires taking a critical look at your business’ current situation. Is your business salable?  What is its current fair market value? What must be done to get your business where it needs to be to achieve your goals?
Both David and Errol routinely work with other professional advisors as part of the exit planning process and stress the importance of ensuring every member is equally informed and aware of all relevant issues. One recent challenging engagement has David collaborating with the business owners and other professional advisors (i.e. accountant, corporate counsel, management consultant and human resources expert) as part of an advisory board with ongoing quarterly meetings to deal with various issues as part of the exit planning process.
My time with David and Errol was very enlightening. It seems to me that a lawyer, and not just any lawyer, is a critical member of the exit planning advisor team from beginning to end. If you want to minimize taxes, maximize net proceeds and protect your family’s wealth you must find a lawyer with family business exit planning experience that you connect with on a personal level. Whether you are planning an internal transfer or an external sale, you will need to consult your lawyer on issues surrounding tax and estate planning, shareholder agreements, business acquisitions and sales, organizational structures, governance models and perhaps resolving shareholder and partner disputes.
For more information about finding and working with a lawyer in your exit planning efforts, contact David or Errol at www.robinsapplebyandtaub.com. If you have any questions regarding the exit planning process in general or want to learn more about our VSP Exit Starter Program, contact us at www.vspltd.ca.
1. Take the Sellability Score questionnaire http://sellabilityscore.com/vsp/Jason-Kwiatkowski to find out how salable your business currently is.