You may have all your personal estate planning complete, but have you planned for your exit of the family business? Do not just assume that you can leave it to a family member or sell it to a new owner and all will be well. No matter the exit strategy you choose, you need to have a plan for it.
However, do you know what a business succession plan entails besides naming a successor? Here are just three of the many things to include in your plan to ensure the continued success of your business.
1. Each person's role
Depending on how the structure of your family business is going to change, you may need to define the following roles:
- Owner and manager: Are these people the same or separate? What decision-making powers does each have?
- Support system: Especially important if the new owner or manager is not a family member, how will your family provide support to the successor?
- Active vs. nonactive members: Who in the family is going to remain actively involved in the business, and who wants to act as passive partners? What will their roles be? Who does not want to be in the business at all?
In addition to these roles, you need to outline the processes for making decisions and resolving disputes.
2. Estate implications
The transfer of your business will have implications for your estate plans and the successor's, including relevant taxes. Speak to an attorney on the influence the succession plan will have on the taxes you will have to pay and any changes you should make for the most financially beneficial outcome.
3. Training and transition
You may have the most detailed plan, but without proper training, it will not lead to an effective transition. Decide on the policies and procedures that will remain and the ones that will change. Make these clear to everyone, slowly start implementing the changes and get the successor and other new employees comfortable with the aspects of the business that are staying the same. Creating a timetable for the transition can help it go smoothly.