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How to prepare for the future as a family-based business owner

On Behalf of | Dec 13, 2017 | Estate Planning

Do you have a family-owned business? Have you given some thought to what will happen to your business once you retire? Do you have a succession plan in place should you no longer be able to handle the day-to-day affairs of your company due to incapacity or premature death? Is it written down? Did you discuss each of the steps of the plan with your proposed successor(s)?

Only about 30 percent of family-owned businesses successfully transition to younger generations, largely due to inadequate planning. If you don’t have a documented succession plan, here’s why you should and how to get started.

Why should I have a business succession plan?

You’ve worked hard to build your brand and achieve the business success you currently enjoy. Having a conversation with your family and potential successors is vastly different from drafting a formal plan and laying out steps and milestones needed for sustaining your business.

  • Failing to plan is planning to fail: Without an end goal and clearly identified steps for achieving that goal, you may lose focus of what needs doing in the day-to-day busy-ness of running your company.
  • It creates a roadmap for successors: Laying out options you discussed prior to your departure provides a clear direction for family members and successors, lessening the chances of confusion and decision paralysis.
  • It promotes longevity of your business and brand: A smooth transition to the next generation helps to keep the business operating as usual and money coming in the door.

How do I start setting up my business succession plan?

Far too many businesses fail for lack of planning. Don’t put it off. Take baby steps and keep moving forward until you have your succession plan in place. Here are two tips to get you started:

  • Talk to your potential successors. If they have a say in where the business is going and how it should get there, they are much more likely to support – and be motivated to achieve the goal of – the plan.
  • Seek professional assistance. As you explore your options and later get into the nitty-gritty details of your succession plan, a legal professional can advise you about buy-sell agreements, tax planning, the best corporate form for continued success and many other issues you may not think of on your own.

Then, revisit the plan periodically to assess whether you are meeting the benchmarks that you established or to revise it as necessary with changing times and shuffling priorities.