ESTATE PLANNING TIPS FOR BUSINESS SUCCESSION PLANNING
Start business succession planning early.
Five years in advance is good. Ten years is better. In fact, many business advisors tell budding entrepreneurs to build an exit strategy into their business plan.
The more advance planning you do on succession planning, the smoother the transition is likely to be.
- Involve your family in planning discussions.
Your family needs to be part of the planning process. Making and then announcing your own succession plan without involving the family is a sure way to guarantee problems. You need to open the dialogue, paying close attention to personal feelings, ambitions and the goals of everyone concerned.
- Look at your family realistically and plan accordingly.
You may want your first-born daughter to run the business, but be sure she has both the skills and the interest to take on the business. Another family member may be more capable, and if no family members are interested in continuing the business, you might want to sell it. You need to examine the strengths of all possible successors objectively, and then think about what would be best for the business.
- Get over the idea that everyone has to have an equal share.
Though giving everyone in your family an equal share may sound like a good idea, that may not be in the best interests of your business. Since management and ownership are separate issues, your chosen successor to run the business may deserve a larger share of business ownership than family members not active in the business. In that case, maybe you should transfer both management and ownership to your chosen successor and make other financial arrangements to benefit your other children.
- Train your successors and work with them.
You cannot expect your successor to run your business successfully without training. Your family business succession plan will have a much better chance of success if you work with your successor(s) for several years before you leave. For solo entrepreneurs, sharing decision making and teaching business skills can be difficult, but definitely worth the effort to assure continuing success for the business.
- Get professional help with your business succession planning.
Companies that specialize in family business succession planning can help you resolve both family and succession plan issues. Business and estate planning lawyers, accountants, and financial advisors also can help you develop a successful plan.
Reference: Free Advice Staff, Family Business & Your Estate
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