You already may have resolved to create and monitor your business plan and develop a succession plan for your business. The first part of the resolution is fairly easy to achieve. After all, everyone with a business needs a business plan. But few of us really consider what would happen to our business - and our families, our employees and their families - if something happens to us.
What will happen to your business when you pass away? If you don't have a business succession plan, you better get on it!
A recent National Law Review article, titled "Five Steps to Business Succession Planning,"lists some simple steps you can take to build a successful exit plan.
Some of these steps include:
Plan Now for Yourself and Your Family. Determine your planned exit strategy, retirement date, and the amount of income and resources you and your family will need after that date. An estate planning attorney can help you in articulating your objectives and creating a strategy to achieve those goals. The original article states that your ultimate goal is financial independence, so that you do not have to depend on the government or other individuals for your well-being.
Determine How to Exit Your Business. If the business is being sold to an outsider, you have settled on a straightforward and hopefully uncontroversial exit plan. But if the business is being transferred within the family, there are other issues. The original article gives an example of the situation in which one of your children is heavily involved in your business to the exclusion of the other children. In that scenario, you might want to even things out by making gifts or bequests of other property to your other kids. If more than one of your kids is involved or if you want to control the behavior of these children, another idea is to transfer your business ownership interest into a trust for the benefit of these kids or for all your children. Drafting these types of trusts and the succession planning relating to the trusts is really complex when you want to keep control of the business until your death or your spouse's death. Talk to your estate planning attorney and examine potential estate taxes and income taxes when transferring the family business-you do not want your children to be forced to sell to pay the taxes at your death (or during your life in the case of gifts).
Work with your estate planning attorney to create the necessary business succession documents, and remember that it is never too early to start your succession planning!
Read more basic steps about a well-thought-out exit strategy in the original article, and talk to an estate planning attorney about the steps you need to take.