For small business or family business owners, business succession planning can be a significant challenge. When you look ahead and consider the future, what do you envision for your business? Who will own it when you decide to step away? How will you be able to pass it on to your family? If not your family, can you find a buyer? If you don’t want to sell, what other options do you have?
The answers to these types of questions will come when you go through the business succession planning process. Today we are going to take a look at the basic issues you’ll face as you decide what you want to happen to your business in the future.
Business Succession Planning: Passing the Business to Family
For many people who own a family business, passing the business down to their children, grandchildren, or other family members is a primary concern. But how do you do this? When do you do it? When do you know to step away, and how much control can you retain if you decide to pass the business on to a family member?
Many of these questions will be dependent upon the type of business structure, what family members are involved with the business, and your personal desires. For example, if you own a corporation you will have to make sure your business succession plan complies with the by-laws or applicable operating agreement rules or restrictions.
Business Succession Planning: Transitions
Let’s say you have a family member who wants to take over the reigns of the family business, and you’re willing to transfer the business to that person. What next? How do you make the transition from you running the business to someone else taking over? How long will you stay to manage the transition? When does decision-making authority pass hands? What responsibilities, if any, will you retain once you’ve made the transfer?
There are no simple answers to these questions, but you will have to consider them as you make your plan. The planning process will involve developing a series of steps that will take place before the final transfer is completed.
Business Succession Planning: Beginning
Getting started on the succession planning path is always best done sooner than later. Even if you believe you know exactly how you want to transfer your business, when you want to do it, and who will take over after you leave, there are numerous steps and stages along the way that you have to complete to ensure your transfer goes smoothly. Beyond the process itself, there are also gift, estate, and income tax considerations to take into consideration if you want to have a complete picture of how the transfer will affect you and your family.