If you are a business owner, your business is part of who you are. You have worked tirelessly to make it successful. You likely rely on your business for your support and the support of your family. But what happens to your business when you are gone or if you want to retire? Without a succession plan in place, your business could struggle to survive or have to go through a tedious probate administration before it goes to your successors.
Business succession planning involves addressing the ownership and continued operation of your business if you sell it, retire, or pass away. There are many certain factors that you need to take into account to ensure that this process is efficient.
Factors to consider when creating a business succession plan
It is not uncommon for business owners to leave their ownership interests to other owners or partners, instead of directly to their “heirs.” They often do this to avoid their heirs inheriting a business that they have little interest in operating or otherwise do not have the expertise to operate. You might consider executing a buy-sell agreement with your partners, giving them the right and the means to purchase your interests in the business upon your death or disability.
In contrast, you may own a family business that you intend to pass on to your family. This can involve different options compared to transitioning your business to unrelated parties. You might consider transferring all or part of your business in the form of a gift or a sale to your family. These types of transactions can not only allow you to transition your business to the next generation, but also to minimize unnecessary taxes in the process.
Why you need guidance when engaging in business succession planning
Business succession planning is often a complicated and complex process. You will need to decide how you want to exit your business, who it will go to, and how you will transfer it, in addition to considering the tax implications, your financial support afterwards, and how to prepare your business for the transfer. An experience succession planning attorney can advise you on what business succession planning options are available and which ones make the most sense for your business.