Succession Planning For Business Owners: What You Need To Know
If you own a business and you intend to pass the business on to someone else, you need to take specific steps to do so as part of your estate planning. You need to create a succession plan for someone else to take over your business after you are no longer able to do so. This is the case whether you intend to retire, become disabled, or pass away. Here are some things you need to know:
What Is a Succession Plan?
A succession plan is used to facilitate the control of your business to another person or persons once you no longer can do so yourself. You can also use a succession plan to pass a share of your business to another person. This is done as part of your estate plan.
Why Do You Need a Succession Plan?
There are so many benefits to having a succession plan if you are a business owner. The primary reason to have a succession plan in place is for a peaceful transfer of ownership of your business. It makes the entire process much easier for the person who is taking ownership. If you do not have a succession plan in place, the new owner may face some legal issues, particularly when there is confusion over who owns the business. For example, if you have a relative who wants to take over your business, but you want the business to go to a non-relative, the relative could potentially argue he or she has ownership due to being in your direct bloodline. If you do not have a succession plan, your chosen successor may not have legal standing to take over the business.
How Do You Choose a Successor?
You have to identify the qualities of the person or persons you wish to take over your business and make your own sound decision. If you have a family member or loved one who has a passion for your business and wants to see it continue once you are no longer involved, you may want to go in that direction. You may want to leave your business to a trusted employee who has expressed interest in taking over. If you have a business partner, you can also leave your share to him or her. Carefully consider the possible successors and think carefully as you decide who you want to have control of your business. You may want to run your candidates by your estate planning attorney to get their insights as you make your decision.