For many business owners, developing a solid succession plan can be overwhelming. There’s the question of who will take over the business upon your retirement, demise, or disability. It’s never too early to create a successful plan. With the help of experienced legal, financial, and tax professionals, you can secure a sound financial future for yourself and your loved ones. Read on as we discuss transferring ownership of your business through succession planning.
This may seem like a no brainer however, choosing the right successor is arguably the most important step in the process. Selecting someone to take over the business isn’t easy. Sometimes the most logical choice is a family member or trusted existing employee. However, each has its drawbacks. You must consider that individual’s strengths and weaknesses, as well as the implications to the business and/or familial relationships. Your successor largely depends on how your business is structured; whether you have an existing partner(s); and what your ultimate business objectives are for the future. Choose your successor wisely. It’s always a good idea to consult with a financial or tax expert to help walk you through your options.
Five common types of succession plans
There are five common types of succession plans, each with advantages and drawbacks:
Carefully weigh the pros and cons of existing logistical and financial decisions to determine the best selling arrangement for your business. Whatever route you decide, it usually involves creating a buy-sell agreement that is secured with a life insurance policy or loan.
A succession plan is important to ensure seamless business operations upon your retirement, death, or disability. While you may not have plans to exit your company right away, the unexpected does happen so it’s wise to have a plan in place as soon as possible. General rule of thumb, the closer you are to retirement, the more important it is for succession planning. This will give you added peace of mind that the business run smoothly throughout the transition.
There are several ways to create your succession plan. And while many small business owners choose to write their own, it’s wise to consult with legal, financial, accounting experts to ensure compliance, as well as minimize risk and tax burdens. Whether you enlist the help of a professional or go it alone, the stages of a successful plan are:
Creating the appropriate succession plan depends on the complexities of the business. It’s wise to consult with a planning expert as soon as possible to avoid potential issues with transition in the future. BWK’s integrated team of expert financial, tax, and strategy professionals provide knowledge and guidance for all your business needs. Contact us today for more information or to speak with a tax expert.