If you have a business, you have likely thought about what would happen to your business after your death. A well-run, well-managed family business could potentially provide for your loved ones long after you are gone. Unfortunately, according to the Family Business Institute, less than one-third of all businesses survive into the second generation. The reason for this is largely due to a failure to plan for the future on the part of the owner of the business. Business succession planning is like writing an estate plan for your business. Few people are enthusiastic about estate planning, but most adults do recognize the wisdom in doing so.
If you have poured your time and energy into your business, you want to make sure it succeeds you. What you don’t want is your death to cause infighting among family members, and you certainly don’t want your business to collapse or end up in liquidation. In a best-case scenario, you will have planned so thoroughly for your business succession that every family member will know his or her role in the business, and the business will continue, as strong as ever.
What are Some of the Problems in Business Succession Planning?
One of the primary issues that small business owners run into when engaging in business succession planning is objectivity. Many parents simply assume their daughter or son will want to take over the leadership role in the business after they are gone. Unfortunately, when there has not been an honest discussion about the business with family members, the outcome may not be at all what you expected. Make sure your business succession plan is realistic, and that none of your decisions would be a surprise for your loved ones. In short, ensure those you plan to turn your business over to are willing and able, and that you never blindside someone with a role they don’t want or are not ready for.
Successful Business Planning
There are several tips that can help you ensure you are planning appropriately for your business. First, start early—the sooner this process begins, the better for all those involved. You may decide to transfer ownership of the business to your children now, thus potentially avoiding unnecessary estate tax, or you may choose to slowly transition family members into your business. Make sure those you expect to take over your company are well-trained, ahead of the time they might need to step in. Growing into a business role is always better than being abruptly thrust into a role the person is unprepared for.
Focus on management, leadership, and ownership when you are engaging in business succession planning. Ownership generally transfers between children, and possibly the surviving spouse. Leadership, on the other hand, could go to a family member, to a partner in the business, or even to a trusted employee. Management could potentially change, based on ownership and leadership, but generally, the most experienced employees are promoted to management.
How Family Estate Planning Law Group Can Help You with Business Succession Planning
Planning and preparation are key to smooth business succession. At Family Estate Planning Law Group, we understand how important it is to you for your business to continue after you pass. We know that you will experience many changes in your life through the years, and we are here to help you plan for those changes. Our experience, knowledge, and skills—not to mention our commitment to our clients—is reflected in our ongoing client care program, as well as our Family Care Meeting™, which encourages our clients to include trusted advisors and family members in the planning process. At Family Estate Planning Law Group, we want to be your partner as you plan to protect your family. We invite you to explore our blog and schedule your complimentary consultation today.