What is the future of your business? Have you made a plan for what will happen to your business after you are gone? Will it be dismantled or will someone else take the helm? Do you want your business to be a part of your legacy?
All of these questions and more, are an important part of succession planning. If it is important for you to ensure your business carries on after you are gone, you will need to make a legal succession plan that will be executed upon your death. This plan can include everything from title transfers, to inheritances, and the line of succession for the business. Will your child take over, or a sibling of yours? Will it go to your business partner or your spouse?
Get professional advice
An important part of setting up solid succession planning is to talk to a lawyer and an accountant. Between the two of them, you can plan for your business’s future, both financially and legally. You want to ensure that any posthumous demands you make in your Will are legal and binding, to ensure that your desires aren’t overthrown or ignored – this will be your lawyer’s duty.
Ensuring that ownership of the business is transferred smoothly to whoever you appoint is important to ensure your business doesn’t suffer during the regime change. You may need to consider promoting additional members of your business in order to fill any holes in the team that may occur in the event of a succession that occurs through the ranks. This could be the case if you don’t have a family member to give the business to, or a business partner. In situations such as this, comprehensive succession planning is necessary to protect the business and its employees.
No succession plan
Without good succession planning in place, your business could fall apart without you. Some possibilities are it could be bought out, it could be taken over aggressively, or it could be dismantled by whoever ends up in charge without a legal mandate to follow. In most of these instances your employees will lose their jobs and your family, if you had one, could be left without a legacy.
Comprehensive succession planning isn’t difficult, although you may have to field some tough questions during the process. A good plan could cover your funeral expenses, your shares in the company, trust fund(s) for family members, and your estate in general. You cannot undervalue a succession plan, no matter how big or small your business may be. If you are one of a group of partners, this will be something you all have to plan for together.
If you have never thought about the future of your business on this level, now is the time. Talk to your family, your business partners or the employee most likely to follow in your footsteps. Contact your accountant to flesh out a financial plan and strategy for the future (which is also important for tax responsibilities too), and finally, call your lawyer and update your Will to include your succession plan.
Miller Kaplan is a leading CPA providing tax preparation, business management and consulting services, including licensing and royalty audits, 401k plans, trademarks, financial and succession planning for high net worth clients, family offices, healthcare, entertainment, real estates, food and beverage industries. For more information on succession planning, visit Wikipedia.org.