BUSINESS SUCCESSION PLANNING

Ineffective business succession planning is one of the leading reasons why family businesses do not survive into the second generation. In the same way that a person would draft a last will and testament, business owners also need to create a succession plan because this ensures that their business survives unscathed. A succession plan gives owners control over their company. This control will prevents fights after the owners becomes deceased. Such advance planning also prevents the Internal Revenue Service from claiming more than is necessary during the transition.

 

Even though every succession plan is different, here are a few basic rules of thumb:

 

• Start the planning early because planning affords business owners more options. Especially when it comes to mitigating tax liability by transferring ownership to children. This will minimize the size of the tax bill after the death of the owners;
• Be objective, determine what the business requires to survive and grow;
• Seek the help of accountants and attorneys. Business owners can work toward reducing the family’s tax obligations. Also avoiding possible legal complications between partners and family.
• Consider the vested interests of company officers and loyal employees. Business owners can retain talent and they’re best customers.
• Lastly, communicate clearly and openly with family members. The business succession plan will best serve the second generation.