As a business owner, you’re already beginning to think about what life looks like for the company when you are no longer there. Maybe you’re simply planning to retire and step away from the company. Maybe you want a plan in place in case you unexpectedly pass away.
Either way, it is important to have a good business succession plan set up. Let’s break down some of the benefits.
It reduces stress on everyone
Even with a small, family-owned business, the removal of the founder and owner creates stress. For a large, publicly-owned company, the same is true. Those impacted could include:
- Potential successors
With no plan in place, everything is up in the air. Everyone feels worried and concerned and stressed. When there is a plan, while the loss of the owner may still leave a serious mark on the company, at least people can move forward knowing that they have structure and guidance.
It moves assets effectively
Your estate plan has the goal of moving your assets to the next generation. But what if your assets are tied up in the business? If they are, it suddenly becomes the most important consideration. What happens to it defines the rest of your plan and allows you to effectively transfer assets.
For instance, maybe you want to leave the business to one of your two children. They’ll get full control and run the company, giving them a source of income. You can then leave more direct financial assets to the other child who doesn’t inherit that income.
Or, maybe your succession plan is just to sell the company to a third party. Your heirs can’t run it. The right plan can guide the sale and split the earnings between your heirs.
It gets heirs ready
If you do plan to leave the company to a child, the most important thing you can do for them is to help them prepare in advance. They need time to get ready. They have to learn the business. They have to understand their duties and roles and expectations.
Part of succession planning means bringing the heir in and working alongside them so that you can teach them the ropes. At the same time, you want to sit down and have conversations about the plan to make sure you’re both on the same page. Everything you do in advance helps things go well, even if the sudden transfer of the business is unexpected.
If you have not begun succession planning yet, it is never too early. It’s a big part of your estate plan and your family’s future. Be sure you know what steps to take to get started.