Business Succession Planning - The Key to Profitably and Confidently Passing Off the Baton Part 1Do you own your business? Whether you inherited it, started it our bought it, your business is a product of your hard work and persistence. As you approach retirement, you likely give a considerable amount of thought to the future of your business. Who will succeed you in running the business? How much information should you share with your appointed or considered successor. If you don’t have an identified successor, you may wonder how to proceed to develop a plan to identify a replacement you can hire if you don’t plan to sell it. You also give a lot of thought to capitalizing on the value you have created or added to the business. This is a challenge that faces the owners of all non-publicly traded companies. Three separate and distinct plans comprise a business succession plan: -- An Exit Plan allows you to leave your business however you wish. Your exit plan should structure the transaction to guarantee that you receive the monies due to you. Without financial security and independence, you will never be able to leave your business. -- A Business Continuity Plan allows the business to continue even after you leave your position. -- An Asset Protection and Estate Plan protects your business and your family in case you depart from the business unexpectedly. All three of these plans are essential if you want to protect your family, yourself, and your business. You should have these plans reviewed every year by your estate and business planning attorney.
You need to make decisions about your retirement income, what will happen to the business, who will manage the business, and how you will transfer ownership to the new buyers. All this needs to be done in a way that is least disruptive to the business’s operations and value. Your BSP should ensure that when you retire or die, your business will continue to thrive according to your vision – and your heirs or the new owners will not be saddled with a huge tax bill for carrying out your plans. Why is Business Succession Planning Important? Inevitably, every business owner will leave the business. You will either transfer ownership of the business during your lifetime because you want to retire. Or you will die or become disabled and the business will have to be liquidated unless you have put in place effective blueprint for your business’s ongoing operation. Without a proper business exit strategy, the involuntary loss of a key person could ruin a business by forcing its liquidation at a chaotic time. As a result, an important part of your financial and estate plan should be proper exit planning. This type of planning, commonly called “business succession planning,” consists of six important steps: If you’re like most business owners, you have not taken time to plan for how you will leave your business. And, no doubt, it’s because you’re busy running the company – and you may not know where to start. But… if you continue to own a business until you die, it will be included in your estate and could be subject to estate taxes. Your family might have to sell the business or its assets at fire-sale prices. The result? You will have worked hard for decades so business investors – liquidators – or the government will reap the benefits. At a minimum if it must be sold or run by your heirs if no alternate plans have been implemented. In Part 2, we will delve further into Business Succession Planning by exploring the critical steps to exiting your business. You’re Invited to Call or E-mail. “If you have questions about owning and operating a business, please send your e-mail to JEFFREY D. ROBERTS, Attorney at Law, CPA, Entrepreneur
300 Commerce, Jerseyville, IL 618.639.0461 2410 State Street, Alton, IL 618.466.2782 [email protected]
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