A very important part of business succession planning, which is often over-looked or ignored, is the issue of who owns the intellectual property that the business is built on. You may not think your company owns any intellectual property of value, but consider this.
The name of the business is a trade name; you may have a logo, which is a trade-mark, even if not registered. Your tag line may also be a trade-mark. Who came up with the ideas? Your spouse? A friend? Or maybe you paid someone to create your brand.
Do you have a brochure? A web site? Who created the art work? Who wrote the copy?
What do you sell? Software? Clothing designed by you? Furniture or equipment designed by your business partner? There is intellectual property in all of those things, and that intellectual property is often the only thing of real value in a new business. Ever watch Dragon’s Den? What is one of the first things the Dragons ask when someone says they have a great idea they want to commercialize? “Where’s the patent?” How is it protected? Can it be protected?
Of course they are absolutely right to ask, because if you don’t own it, chances are either someone else does (sigh), or no one does. If no one owns the IP, then anyone can use it, and where’s the fun (and profit) in that?
If you have created the name, logo, designs, artwork etc. before you incorporate, as is often the case, they belong to you personally. Or worse yet, they may belong to another person who created them for you. Did you realize those things should be assigned to the company? And what has this got to do with succession planning?
It may not appear to make much difference to you and your day-to-day operation at this point, who owns the IP rights, but it will matter a lot when you (or your estate) want to sell the business and, surprise! the buyer wants assurances about the intellectual property as part of the deal. If someone other than the company owns the IP, then assignments have to be obtained. That may be easier said than done, and even if you are the owner of everything personally and you are alive and well, you may now have a tax problem if your IP has increased in value.
If you own the IP personally when you die, then it becomes part of your estate. Now your personal representative or executor has to deal with it. If it’s valuable, your estate may have to pay probate tax on it, but certainly any buyer of the IP is going to want to ensure that someone has the ability to sign the necessary transfers of ownership.
Give a bit of thought to what you and/or business might own that isn’t obvious, but has value, and then consider what would happen if you were suddenly out of the picture. If the result doesn’t look pretty, now is the time to fix it.