Every business owner should consider what will happen to their business when they die.
With proper estate planning and a thorough business succession strategy, you can dictate exactly how you want the transition to go.
Questions to consider
To help you make choices regarding your succession plan, consider these crucial questions:
- Would you prefer to keep the business in the family?
- Do any family members show interest and ability?
- Will your business contribute to your retirement funding?
- How can you provide for family members participating in the family business currently?
- Who will manage the business?
- Will you work in the business for a period of time after the transition? For example, staying on one year after the transition.
The answers will guide you through the decision-making process as you create your plan.
Choosing a successor is typically easy by the time you get to the succession planning stage. It is often a member of the next generation that already plays a critical role in the business, learning the ropes and soaking up vital information.
If there is conflict surrounding who will take over the business, dividing management power is generally not a good idea. Although, dividing ownership may prove more effective.
After deciding who will own and manage the business, you must form a plan for transferring the company assets. The beneficiary is typically the owner, but you have the power to decide how to distribute the wealth. Your aim is to make the transfer without triggering crippling taxes.
After developing a thorough business succession plan, you can enjoy the hard work you put into the business and the peace of mind you gain from knowing what will happen to it.