Business owners need to have a succession plan in place. This plan can help with the transfer of the business to the next generation. Many business owners want to leave their companies to their direct heirs or perhaps to other beneficiaries – such as a dedicated employee – usually in a situation where the business owner has no heirs who are interested in eventually taking over the company.
Many owners don’t have a succession plan at all, so simply drafting one is a positive step in the right direction. By considering a few key tips, the process of starting to craft a succession plan can prove to be a particularly efficient and effective experience that better safeguards both personal interests and a company’s broader interests as well.
Even though doing so can be uncomfortable, business owners should be transparent and talk with family members about their succession plans. It may turn out that heirs don’t view the business the same way. Say that you own a business and plan to leave it to your daughter but, upon telling her this, you learn that she’s in the process of starting her own unique business venture. It’s best to know how loved ones feel about one’s approach in advance so that other plans can be made, if necessary.
Get started early
It is also a good idea to draft a succession plan as early as possible. Waiting until the last minute means that it may be rushed and there could be oversights or mistakes. Ideally, business owners should create a succession plan and then work with their successor– the next owner – to train them on the job. It may be wise to do this training for a few years before actually leaving them the business.
Remember that all heirs don’t have to be involved
Finally, many business owners reasonably believe that all of their children will want a fair share of the business and that they will all want to be involved. This may be true, but it’s not necessary. It’s possible for a business owner to just leave the company to one person or to give multiple heirs very different roles within the business. Ideally, these different roles will be catered to each individual’s specific skills and abilities, helping the company run smoothly. Division of ownership does not always have to be equal.
Creating a plan
For those who are considering drafting a plan, it’s important to look into all of the different legal steps that need to be taken in order to craft the most effective plan for both the business and one’s family. Seeking personalized legal guidance is a good way to get started.