More than 70% of businesses won’t survive the transition from founder to second generation. Between hefty taxes and family drama, many sole proprietorships or partnerships die when the founder relinquishes his or her ownership. But it doesn’t need to be this way for your business.
Business succession planning should be a priority if you would like to pass your business down to future generations. Having a business succession plan in place will ensure a smooth transition between you and the future owners of your company. However, succession planning is highly emotional—besides the discomfort of talking about what will happen to your business in the case of your death or incapacitation, discussing which members of your family will assume ownership or control of certain business assets can create familial discord.
Hiring an attorney with experience in business succession planning will help you determine several important factors, including whether or not your business needs to be restructured as a corporation, how to make decisions about management versus ownership, and tax strategies that can help secure the future of your business.
But a legally sound business succession plan doesn’t always translate into a successful one—here are some tips to improve the chances that your business succession plan will be successful:
1. Start planning early. Once you’re looking at retirement is often too late to start planning for the succession of your business. The longer you spend planning, the more seamless the transition will be.
2. Involve your family. Don’t create a plan and then dictate its details to your family. Rather, get them involved in the process, and pay attention to the feelings and personalities that are at play.
3. Be realistic. Yes, it’s always a nice thought to pass your business down to your only son or daughter…but do they have what it takes to actually run a successful business? Being honest with yourself isn’t always easy, but it can secure the future of your business…and your legacy.
4. Divvy it up. You don’t have to split your business assets evenly amongst beneficiaries. Your attorney can help you determine whether to use voting and non-voting shares, and how to split up business management and ownership for the best possible long-term outcome.
5. Train your successors. Spend at least one year, if not longer, working alongside your successor and training them—not only about business operations, but also on decision-making and skillset development.
Don’t procrastinate when it comes to business succession planning. There is no time like the present to start discussing your wishes and developing a plan to secure the long-term viability and success of the business you have worked so hard to build.
Request a Free Business Succession Planning Consultation
Talk to the attorneys at Deliberato Law Center about how we can help you create a successful business succession plan. We offer a free consultation to all new clients. To schedule yours, contact us via the brief form below and a member of our legal team will get in touch shortly.