Have you planned for your company’s future after you’re gone? Business succession planning is proving to be one of the most neglected areas facing business owners. Some studies have shown that only 26% of business owners have a written continuation plan. Of owners over age 60, only half have put their plans in writing.
Developing a succession plan
In its most basic form, a succession plan provides a road map for your partners, heirs and successors in the event of your death, disability or retirement. It can also be used to orchestrate the sale of your business. Your plan can include:
- The distribution of business stock and other assets
- Debt retirement schedules
- Life & disability insurance policies
- Buy-sell agreements between partners and heirs
- The division of responsibilities among successors
- Determination of the value of the business
Business succession planning is often a complicated process involving numerous legal and tax issues as well as family relationship matters. Consult a lawyer, accountant or financial planner to help you evaluate your options for creating a strong plan.
Your personal and professional goals are determining factors. Some important questions you need to answer are:
- Is there someone capable of running the business once you’ve stepped down?
- How much control of the business do you want to maintain?
- Are there key employees you want to retain?
- Are there sufficient assets to pay the estate tax, equalize the estate, and keep the business?
- How much money do you need to reach your financial goals?