Believe it or not, having a business succession plan can be vital for your company’s success.
Benjamin Franklin once famously said, “In this world nothing can be said to be certain, except death and taxes.” If you are a business owner, then you already have experience dealing with taxes, and, grim as it may be, you also need to face the fact that one day we will all pass away. In order for the company that you poured your heart and soul into to continue after you are gone (or decide to retire or move on to another business opportunity), you need to plan ahead. Having a comprehensive business succession plan in place will ensure a smooth transition to the next generation.
Key aspects of business succession
Whether your company employs one person or hundreds, the most important part of business succession planning is to name someone to take the reins after you are no longer there. This can be someone in the company who has worked alongside you for years, or can be a trusted advisor from outside. Regardless, having a defined successor will give your customers, clients, colleagues and vendors a point of contact, as well as giving your employees a new leader.
It is important that your successor have in-depth knowledge of how the company works, including what sorts of goods/services you provide, how your billing is done, your vendor relationships (if applicable), staffing needs, customer base and more. If there are several possible successors to choose from (amongst family members or long-time employees, for example), you also need to weigh each person’s leadership skills and how likely he or she would be to accept someone else being appointed instead of them.
In addition to naming people to take the reins after you step down because of illness, retirement or death, a good business succession plan also includes:
- Defined goals for the business both during and after the transition to successor management
- Buy-sell agreements giving the option to buy out the controlling interest of partners or shareholders when they retire (or to purchase those interests/shares from heirs)
- Non-compete agreements to stop people leaving the business from starting up competing companies serving the same geographical area or niche, at least for a set time
- Tax planning in order to limit the economic effects of a principal or shareholder’s estate taxes on the company’s bottom line
In order to protect your business against the unknown (including your sudden incapacity or death), it is important to have a succession plan in place as soon as possible. An experienced estate planning and tax attorney like Connie Yi can help you create a detailed business succession plan that best meets your needs and suits your unique situation. Contact her Pleasanton, California, law office today by calling toll free at 888-312-6978 or sending an email.