Verbal Agreement: How It Can Become a Succession Plan
As a business owner, it`s important to have a succession plan in place. A succession plan outlines what will happen to your business when you retire, sell it, or become incapacitated. Many times, business owners put off creating a succession plan because they don`t know where to start or because they believe it`s too complicated. However, a verbal agreement can be a simple and effective way to create a succession plan.
Before we dive deeper, let`s first define what a verbal agreement is. Simply put, it is an agreement made verbally between two or more parties. It is not written down and is not legally binding. However, verbal agreements can still hold weight and can be used to create a succession plan.
Here`s how it can work:
1. Choose a successor: The first step in creating a succession plan through a verbal agreement is to choose a successor. This person will take over your business when you retire, sell it, or become incapacitated. It`s important to choose someone who is qualified and capable of running your business.
2. Discuss the terms: Once you have chosen a successor, sit down with them and discuss the terms of the agreement. What will happen to the business when you retire, sell it, or become incapacitated? Will your successor buy the business from you? Will they take over the business without paying you anything? Discuss these terms in detail.
3. Get everyone on the same page: After you and your successor have discussed the terms, it`s important to get everyone on the same page. This includes family members, employees, and any other stakeholders in the business. Let them know what the succession plan is and how it will be carried out.
4. Document the agreement: While a verbal agreement can be effective, it`s still important to document it. This can be done through a simple written agreement or a more formal legal document. Either way, make sure that the agreement is written down and signed by all parties involved.
5. Review and update the agreement: Finally, it`s important to review and update the agreement regularly. As your business grows and changes, the succession plan may need to be updated to reflect these changes. Make sure to review the agreement at least once a year and make any necessary updates.
In conclusion, a verbal agreement can be an effective way to create a succession plan for your business. However, it`s important to choose a qualified successor, discuss the terms in detail, get everyone on the same page, document the agreement, and review and update it regularly. With these steps in place, you can rest assured that your business will continue to thrive long after you retire, sell it, or become incapacitated.