Volume 9 Issue 4
Business Succession - Mary's Morass
© by Tax & Business Professionals
Far too little attention is given in business or life to one of the
things the dictionary defines as "succession" namely, "the
act or process of following in order." There are many things which
need to " !follow in order" in order for a business entity to
succeed or, at a minimum, be terminated in an orderly fashion.
The next series of these newsletters will touch on some of the factors
involved in business succession and wealth transfer. The range of subjects
that relate to "succession" is large, and some businesses live
or die based on highly particularized events such as the continuance of
certain tax benefits, which can change without warning.
Many business people have not addressed possibilities like: (1) a
key employee quits and goes to work for a competitor; (2) the owner dies
or is permanently incapacitated; (3) there is no insurance coverage for
a loss; (4) a valuable lease expires and the business is at the mercy of
the landlord; (5) some, or all, of the business' computers fail and there
is no backup; or (6) the owner or principal of a business gets divorced.
Remember, this is only a partial list.
As might be expected, there are answers to, or at least reasonable
plans for dealing with, most of the succession problems listed above. Since
space is quite limited, in this edition we will deal only with introducing
the topic and one of these subjects - lease renewal.
The importance of Your Lease
Many businesspeople don't think about the importance of their lease
until it is too late to act effectively. A good example is "Mary's,"
a restaurant that became a fixture in Marysville. Mary started Mary's after
quitting her former waitress job and was successful in her venture, putting
in long hours managing her restaurant. Her place was located next to a
then-small video store.
Eventually, the video store wanted the space occupied by Mary's restaurant.
Unfortunately for Mary, her year-long lease had expired and she was automatically
on a month-to-month common law lease status, often called a "tenancy
"At will" means at the will (i.e., "good graces")
of the landlord. Of course, the landlord's "will" can quickly
become focused in favor of a tenant like the rapidly expanding video store
that can afford to pay premium rent and remodel the premises. Month-to-month
leases, or tenancies at will, cut both ways. Yes, you can leave the rented
space with only one month's notice, but you can also be kicked out just
This is what happened to Mary. Since she could not find other suitable
premises for her restaurant in so short a time, she ended up with "de
nada." Her staff went intact to another establishment that changed
from a lunch-dinner sports bar to a three- meal-a-day place. To compound
Mary's misery, her clientele essentially moved in toto with the staff.
What is the moral to be learned from Mary's Morass? Look at your
lease! If you, or a client, have a business that caters to car or foot
traffic (and is growing), you should check the lease, long before it becomes
What is best for a business depends on the vagaries of the particular
landlord and the particular tenant. Many businesses have been at the same
location on a month-to-month basis for a long time and seldom give a second
thought to vacating. But written leases are an important way to ensure
business succession at a location. Alternatively, if you can't get a lease
that provides adequate long-term protection, then an orderly retreat to
new premises may be wise.
Many leases have automatic options to renew that have to be exercised
in writing several months before a lease is due to expire. It is a good
idea to check the renewal provisions in a lease before the right to renew
expires and Mary's Morass arises for you, or a client.
In our next issue, we will deal with a different problem - an associate
or employee leaving your business, and what you can do to protect your
Previous Article | Next Article
List of Articles by Tax & Business Professionals
Published jointly by The Tax & Business Professionals, Inc. and the law firm of Newland & Associates as a service to their clients.
If you are a tax professional and would like more information about the subjects covered in this newsletter or any other tax and business matter, please call the Tax & Business Professionals, Inc. at (800)-553-6613, e-mail us at
, or visit our web site at http://www.tax-business.com.
For a full range of business law and tax-related services, call the law firm of Newland & Associates at (703) 330-0000.
If you are reading this newsletter but are not on our mailing list, and would like to be, please contact us at (800) 553-6613.
While designed to be accurate, this publication is not intended to constitute the rendering of legal, accounting, or other professional services or to serve as a substitute for such services.
Redistribution or other commercial use of the material contained in Tax & Business Insights is expressly prohibited without the written permission of Tax and Business Professionals, Inc.
You can search for information in the entire Authors Row section,
or in the entire site. For a more focused search, put your search word(s) in quotes.
Tax & Business Professionals Main | Authors Row Main | Home