Your business is your baby. You have spent the past several years, or in some cases, decades, building and strengthening it and as the owner, have always tried to make the proper business decisions in order to promote growth and prosperity for both you and your business family.
But as you edge closer to the age of retirement, have you given any thought to what comes next? Who will you hand the reins of your business to as you take the next important step in your lifes journey? Will this heady responsibility go to an heir or to a professional manager? And what happens if there is more than one heir? How can you hope to maintain financial security of your business and yourself throughout this important transition and whom do you turn to for help?
These are perhaps some of the most important decisions a business owner can face, especially as they have the power to affect the success and stability of your business in the years to come. You are in need of a business succession plan.
In short, business succession planning is the process by which you determine how you are going to transfer the ownership of your business while maintaining and maximizing your own personal financial security. This involves your transition from a business management role and should be addressed as a part of a larger financial plan or along with estate planning.
But why is business succession planning so important? As mentioned above, a troublesome management transition can often produce negative results and can have a drastic impact on the viability of your business. In extreme cases, this poor transition can even result in the failure as a whole of the business you have worked so hard to develop.
Additionally, if your plan is to have the business taken over by one or more members of your family, it can be fraught with pitfalls that should be addressed by all parties involved for the sake of the business. A business succession plan is the best way to ensure that all outstanding issues are dealt with before an unforeseen event occurs, such as the death of you or a business partner, leaving chaos in its wake. Business succession planning provides you with the peace of mind that you are doing what is best for you, your family and your business.
Business succession planning
as a team
Business succession and
Any time that a business decision doubles as a family matter, there is a high degree of fallibility and it should be kept in mind that even though you may wish to pass your business on to a family heir, it isnt always a viable option. The key to successful family succession is to plan ahead. By anticipating the problems and factors that could arise and complicate matters, you can be forthright in addressing these issues and can concentrate on the task at hand: making your family succession as seamless as possible.
A family succession can involve a great number of difficult decisions. For one, you must decide which, if any, family member is the right person to take over the reigns of the business. This involves evaluating both their skills as well as their interest level and making a choice that will best benefit the business. If your family members have not displayed the interest or the aptitude required to take over a business such as yours, it might be worth looking at the possibility of a ceding the business to someone outside of the family. Another option would be to sell the business to a third party.
And just as a family succession can contain problems, there are added benefits to the arrangement as well. As the owner of the business, you may find it much easier handing the management role over to a member of your own family other than to someone with outside interests. In business succession, it can be difficult to learn to relinquish control in the decision making process to your chosen successor, but a large part of this can be eliminated by knowing that the business you developed is now in the hands of a trusted family member. One thing to bear in mind however, is that with family successions, you may grow to depend heavily on the outside support members of your team so it pays to make sure you have surrounded yourself with those that you feel have your best interests at heart.
Other issues concerning
business succession planning
Another issue of concern may be the effect that taxes will have on you, your estate and your business and how these taxes will relate to your business succession planning. Your outside advisors will again be very valuable in this area as they can give you advice on the various tax exemptions and deferrals that may be of use to you and can help you organize your estate to limit the taxes on it.
By planning ahead and knowing the right tools to use for the job, a business succession plan can smooth the way for a successful business transition.
Other article of similar interest: Using life insurance as a business succession tool
GETTING ADVICE: Business succession planning
requires careful considerations to ensure all essential matters are covered
and reviewed. It should also be formulated, reviewed periodically and
discussed with a qualified adviser or team of advisers to incorporate
any changes in your personal circumstances.
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