Failing to have a succession plan is often the reason family businesses do not survive across the generations. Creating, designing and implementing a succession plan can protect the family’s legacy, according to the article “Planning for Success: How to Create a Suggestion Plan” from Westchester & Fairfield County Business Journals.
Start by establishing a vision for the future of the business and the family. What are the goals for the founder’s retirement? Will the business need to be sold to fund their retirement? One of the big questions concerns cash flow—do the founders need the business to operate to provide ongoing financial support?
Next, lay the groundwork regarding next generation management and the personal and professional goals of the various family members.
Several options for a successful exit plan include:
Once a succession exit path is selected, the family needs to identify successors and identify active and non-active roles and responsibilities for family members. Decisions need to be made about how to manage the company going forward.
Tax planning should be a part of the succession plan, which needs to be aligned with the founding member’s estate plan. How the business is structured and how it is to be transferred could either save the family from an onerous tax burden or generate a tax liability so large, as to shut the company down.
Many owners are busy with the day-to-day operations of the business and neglect to do any succession planning. Alternatively, a hastily created plan skipping goal setting or ignoring professional advice occurs. The results are bad either way: losing control over a business, having to sell the business for less than its true value or being subject to excessive taxes.
Every privately held, family-owned business should have a plan in place to establish what will happen if the owners die or become incapacitated.
An estate planning attorney who has experience working with business owners will be able to guide the creation of a succession plan and ensure that it works to complement the owner’s estate plan. With the right guidance, the business owner can work with their team of professional advisors to ensure that the business continues over the generations.
Sitting down with us will empower you to feel 100% confident that you have the right combination of estate planning and business planning solutions to fit with your unique asset profile, family dynamics, and budget. We see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started.