What’s at stake?
If you own a business, you must ask yourself, “What happens if I (or my business partner) die, get divorced, suffer a disability, or want to transition the company to a family member or outsider?”
The survival of your business, the wealth you secure for your family, and perhaps even the relationships between your spouse and children all hinge on these issues.
A quality business succession plan provides answers–and peace of mind.
Questions you are
or should be asking:
When should I be making decisions about business succession?
Sooner is always better than later.
Most business consultants advise that the best time to create a business succession plan is when the business is first being formed. Early planning lets you begin preparing for your financial future and gradual transition to retirement. It also ensures that the business continues if the unexpected happens and you’re not there to make decisions.
If you are the sole owner, the best time to act is while you are clearly in charge, running the business smoothly and profitably. That’s when you have the greatest leverage.
Similarly, if you’re in business with one or more partners, determining business succession is best done while everyone is getting along and optimistic about the future. You may need to make changes along the way, but creating a succession plan that everyone views as fair is more likely to occur when the business is in its earlier stages.
Without a succession plan, what would happen if my business partner or I were to die suddenly and unexpectedly?
That’s the key question. Let’s say you and your business partner each own 50% of the business, and that your partner dies. Could his or her spouse or children (or an outsider like a court appointed guardian or trustee) suddenly become your new partner?
Without proper and well-documented plans, that’s exactly what could happen. You might end up with a business partner whose opinions and/or business goals differ completely from yours. Worse, your new partner may lack the ability, experience, temperament, or any of a dozen other qualities needed to run a business.
And that could be the least of your problems.
Are succession issues different for family-owned businesses?
Business succession can be particularly complex if yours is a family business. It may take a while, for example, to determine which family member(s) are and aren’t interested in eventually taking over the business. It also can take time to decide who is most capable of running the business.
And then, of course, you may decide that, say, the youngest of your three children is best suited to take over when you’re gone. How would that affect the family dynamic?
Conversely, what would you do if you were to discover that your spouse and children have no interest in taking over the business? In that case, business succession could become more about selling the business and dividing the proceeds than about making a transition to new leadership.
Other questions to consider:
How do I structure a business succession plan that guarantees the income I need for the future?
Can I retain control of my business while transferring partial ownership to family members or partners for retirement or estate planning purposes?
In the event that I die, how do I ensure that my family gets a fair share of the value of my business?
How do I equalize the inheritance among my children if only some of them will want to be involved in the business?
How we can help you
If you are a business owner, we can help you work through these and many other business succession issues. Among the solutions we offer you:
- Craftng custom buy-sell agreements
- Structuring tax-efficient business succession plans
- Creating trusts for your children that protect their interests in the business from creditors, as well as from tax and divorce problems