Should You Have a Business Succession Plan?

If you are a business owner, the answer is a definitive YES. When you are building and growing your business the last thing you think about is the possibility of selling it or passing it on to the next generation. However, if you are a successful business owner, that day will eventually arrive, and the better prepared you are the easier the transition will be.

Business succession planning is really an extension of your personal estate planning but with a focus on your business assets and the future operations of your business.

Planning for your retirement, planning for your heirs and employees upon your death, and planning for the person who takes over the reins of your business are closely tied together. However, your planning objectives in each of these situations may be different.

What is a Business Succession Plan?

A business succession plan determines how your business will be transferred to others and outlines the steps necessary to prepare for the transition.

The plan affects you, your family, employees, clients, suppliers, creditors and others. A good succession plan ensures that your wishes will be carried out if you should die suddenly or can no longer run your business due to illness or disabling injury. It can also help you ease into retirement and provide a retirement income.

Tough Questions You Need to Ask Yourself

Thinking about succession planning requires asking some tough questions.

• When I die, how will I divide my estate amongst my family in a way that is fair and equitable to all?
• Who will take over control of my business?
• What other assets do I have and who will receive them?
• How much control over the business do I want to retain when I retire?
• When will I release control completely?
• Where will the money come from to fund the purchase of my business and fund my retirement?
• How will my family retain their standard of living when I die or if I become disabled?
• How will I ensure my business continues to run smoothly?

Changes in life stages such as marriage, death or divorce can also impact the business succession plan you create. You need to review your plan regularly and amend it for any changes in your situation or financial goals over time.

Planning for Unforeseen Events

When thinking about succession planning you need to consider unforeseen events. You have to consider the possibility of a disability of your early demise, either while you still own the business or when you are retired but still involved to some degree.

While you can not guarantee that you will always be in good health, you can take steps to prevent a death or disability from harming or even destroying your business by setting up a properly funded buy-sell agreement.

Your Unique Business Succession Plan

Business succession planning involves a variety of business and personal issues which need to be considered together. Every plan is unique; therefore it’s important to develop your business succession plan in consultation with your legal, accounting and tax professionals.

Your financial advisor can work with your other advisors to help you create a plan that meets the goals and dreams for both your business and personal life.

You have invested time and money in your business and nurtured it. Now you need to take appropriate steps to ensure that it continues to prosper and to create wealth for your family.

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