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SUCCESSION PLANNING

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If you are a business owner, you should consider succession planning as part of your overall estate plan. Succession planning is the process of transferring ownership, control and management of the business to others upon your retirement, incapacity or death. Many family-owned businesses fail to engage in such planning. This is the primary reason why one-third of such businesses cease to exist after the first generation of ownership.

Many considerations need to be addressed when creating a business succession plan. In addition to the minimization of estate taxes upon the owner’s death, facilitating the transfer of ownership, control and management of the business is critical. The following are some initial steps to consider when formulating a business succession plan:

Step One: Create a timeline for the transition of control and ownership of the business. Start considering when to begin delegating authority to others and when to complete the transition process. Afford as much time as possible to train your successors so that the transition of authority is orderly and smooth.

Step Two: Choose the right individuals as your successors. They should ideally be those who share your business goals and philosophies and have the right managerial experience. These traits are critical whether the successors are key employees or family members. Sometimes it is prudent to transfer management to a group of key employees while transferring ownership to your children or family members.

Step Three: Work with a team of professionals, including an estate planning attorney, financial advisor, CPA and business appraiser, to determine the appropriate strategies for transferring ownership of the business and for minimizing estate taxes. There are multiple options which may be used, including gifting, creating buy-sell agreements and purchasing life insurance.

Please contact us if you would like us to help you, your family and your business.