If you would like to see your family-owned business, and the legacy it creates, be passed down to your children and grandchildren, for generations to come, it is crucial that you consider the succession of your business. For that, you need to create a proper business succession plan.
The benefits of a business succession plan
At some point, you will begin to consider retirement from managing your family-owned business. But, it will not be as easy as submitting your letter of resignation. You won’t feel comfortable retiring until you know you have left the business in capable hands.
Unfortunately, most business owners do not have a succession plan in place. While most business owners expect to pass their business on to the children, statistics show that less than 30% of owners have put an actual succession plan in place.
Why do I need a succession plan?
The ultimate goal should obviously be a smooth transition of ownership. Without a fluid shift of management, your business may be at risk and may not survive your retirement intact. A well thought out succession plan is the solution. The two most common issues that keep family-owned businesses from surviving are inadequate tax planning and family disputes. Luckily, both of these issues can be handled with comprehensive business succession planning.
What to include in your succession plan
Every business succession plan needs to cover the following matters: ownership, management and taxes. Contrary to what many believe, ownership and management of a business are very distinct concepts. You can transfer ownership of your business to all three of your children, but only name one child to take over management of the company. Indeed, not all of your children will be interested in managing the business or becoming active in its operation.
Planning for business taxes is crucial
When you begin planning the succession of your business, taxes will be a very important component of the plan. The goal is to decrease the amount of taxes that your estate will incur as a result of your business interest. There are many business tax strategies that can be used, if done so properly.
For example, most small businesses qualify for certain tax credits, which change from one year to the next. Taking advantage of these tax credits means planning for taxes ahead of time. There so many federal, state and local credits for business, with their own requirements, that may be available to you.
The time to start planning is now
A successful business succession plan needs to be created as soon as possible. That is the best way to ensure that your family-owned business will continue to grow from generation to generation. Early planning is also required if you want to retire comfortably, while protecting your family’s future, and the future of your business.
If you have questions regarding succession planning, or any other family-owned business issues, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.