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Business Succession Planning – Part 4

Business Succession Planning – Part 4

My name is Tom Schumacher. I am a business lawyer for Bakke Norman Law Offices. This is the fourth video in a series of videos regarding business transition planning. This topic is really a subset of the concept of working on your business versus only working in your business.

In the second video, I addressed having an advisory team of personal and business advisors to provide different viewpoints and objective critical analysis of business decisions. The third video addressed how the legal structure of your business impacts business succession planning and the transition of your business.

It does not matter what legal form your business takes, it is important that you have well documented and organized business records. A successful business will have documented and organized policies and procedures for any systems and for all business functions. In the evolution of a business from startup through the owner’s eventual exit, accurate business records involve every aspect of a business.

Organizational documents are the first category of business records. For sole proprietorship and partnerships, written agreements are not required. However, to mitigate future problems, we recommend that every business involving more than a single owner document the business relationship in a written agreement.

Corporations and limited liability companies must file articles of incorporation and articles of organization respectively with the Wisconsin Department of Financial Institutions. A corporation must maintain bylaws and corporate minutes and hold an annual meeting.

A limited liability company must maintain at its business location:

  1. Tax returns for the four (4) most recent years;
  2. Financial Statements;
  3. Amendments to any LLC documents;
  4. Records of any additional member contributions;
  5. Any other documentation or information pertaining to the operation of the LLC and the members; and
  6.  Any information relating to the dissolution of the LLC. 

When LLC’s first became authorized in Wisconsin they were promoted as being less formal and simpler to operate than corporations. In reality they are often more complex, particularly from a tax perspective.

Entities should also maintain a stock or membership ledger showing the interest of each of the owners of the business. Anytime there is more than one owner of a business there should be a written agreement governing the transfer of an owner’s interest in the business.

These agreements may be referred to as a buy/sell agreement, transfer restriction agreement or other similar names. These agreements address restrictions on the transfer of business interests, including when an interest may be transferred, to whom it may be transferred, the value of the interest to be transferred, the rights of current owners to acquire an interest that an owner is seeking to transfer and the applicability of the agreement to new owners of the business.

We often discuss these agreements in the context of what happens in the event of the Four D’s — death, disability, disagreement and divorce.

Personnel records are another business record which needs to be maintained and managed. A file needs to be maintained for each employee. It is recommended that a business also maintain an employee handbook.

Another group of records are the insurance policies for various coverages, documentation of retirement plans and flex spending and health savings account options.

If your business includes assets in the areas of patents, trademarks, copyrights and trade secrets, both documentation and applicable policies and licensing must be managed.

A business has the actual numbers for balances and payments of loans in its financial statements, but many times are often hard pressed to be able to put their hands on the underlying loan documentation for its financing.

In connection with reviewing your business records, Bakke Norman has developed a Business Audit Guide to assist with tracking and maintaining business records. You may download this form from our website,

Good luck as you review and organize your business records.