Business Succession Planning
For many family business owners, retirement seems like a tiny speck on the distant horizon. But alas, time marches on steadily and planning for the transition of leadership of the business you worked so hard to build and maintain should be on your mind regardless of how far from retirement age you are.
The Entrepreneur magazine says, “More than 50 percent of all small-business owners are 50 or older, according to the U.S. Small Business Administration. That means many of America’s 28 million small-business owners are coming to that point in their lives when they need to think about a transition for their businesses.” Family businesses account for a staggering 50 percent of the gross domestic product of the U.S., and it is not just in small storefronts or website businesses: 35 percent of Fortune 500 companies are private or public companies that are controlled by families. That means that not only for the sake of your family, but the sake of the American economy Succession Planning is critical. Here are some tips on planning your family transition for your company.
A Legal Succession Plan – Fidelity suggests that: “At a minimum, a business succession plan should address the systematic transfer of the management and ownership of a business.” Management succession planning may include:
- Development, training, and support of successors.
- Delegation of responsibility and authority to successors.
- Outside directors/advisors to bring objectivity to the process (when necessary).
- Maximizing retention of key employees through equitable compensation planning for management, family/non-family employees, and active/inactive shareholders.
Set a Timetable –
Determine how and when the control of the company will be shifted to your successor. Ease your successor into the position and avoid the impulse to routinely overrule his or her decisions during this transition phase. Ease your successor in through training both formal and informal in nature.
Plan for Taxes and Legal Changes – Talk to a specialized lawyer for business succession planning that will help with taxes and probate issues. It’s important to understand that the value of your business may continue to grow between the time you plan your estate and when you pass away, and that the taxable estate will include the value as of your date of death.
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