Succession planning is a vital element of estate planning for business owners. It involves preparing for the future of your business if something should happen to you. A comprehensive and effective succession plan should allow you to ensure the success of your business in your absence.
What do you want to happen to your business in the future?
Business owners have several paths to go about succession planning. It might involve identifying your successor and preparing them for the job. It can streamline and smoothen the ownership and management transition. However, it can also allow you to address other issues, such as if you want to pass the business to the next generation or if you have other plans. Here are important questions to consider:
- Who will run the business in case you become incapacitated?
- Do you have a family member or someone in mind who can take on your role and the responsibilities that follow?
- How do you want your successor to manage your business?
- Does your successor share your vision and core principles?
- Do you prefer to sell the business to an outside buyer?
- Would you consider closing the business and distributing the assets upon death or retirement?
Your succession plan and the necessary documents are contingent upon your business structure. You could consider selling your ownership percentage to your business partners or a third-party buyer at your discretion. Remember, any significant transactions can have tax repercussions.
Succession planning is planning for success
As a business owner, you can look beyond your family members and save them from the stress of operating a business. You can also restructure the management and appoint a CEO while allowing your family and loved ones to retain ownership. The objective is to save and solidify the business legacy that you built before it is too late.