While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones.  Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.  What Estate Planning does not control is the succession of a business. Many people want to assure the business they worked so hard to build will continue to grow and prosper after their death.  While this may seem like the American dream, it can be disastrous unless a good business succession plan is in place, expectations carefully outlined, and good choices made when appointing the future decision makers.

A Business Exit Strategy Specialist can help forecast issues and assist with implementing a plan to avoid as many issues as possible.  The books below will give business owners some ideas of what can go wrong and how to assure things go right.

Ruling From the Grave is not always a good idea.  


Keep the Family Baggage Out of the Family Business:  Avoiding the Seven Deadly Sins That Destroy Family Businesses

-   Quentin J. Fleming, Author

Family businesses epitomize the best of the American Dream: you work hard, you're your own boss, you leave a lasting legacy to your children -- or do you? Statistics show that only 30% of family businesses survive to the second generation, and a paltry 10% survive to the third generation. Family businesses are in trouble, and their survival is crucial to us all. Their success ensures our country's success -- and their failure can drastically affect our economic health. 
In Keep the Family Baggage Out of the Family Business, family business expert Quentin Fleming has identified the Seven Deadly Sins that are invariably responsible for a family business's demise. Keep the Family Baggage Out of the Family Business presents practical and accessible advice geared toward the average family business owner or employee and is an invaluable tool for helping family businesses not only survive but thrive.


Family Wars – The Real Stories behind the Most Famous Family Business Feuds

-    Grant Gordon & Nigel Nicolson, Authors

Many of the world's greatest businesses are family owned, and with this comes the threat of family feuding, sibling rivalries, and petty jealousies. Family Wars takes readers behind the scenes on a rollercoaster ride through the ups and downs of some of the biggest family-run companies in the world, showing how family in-fighting has threatened to bring about their downfall. Covering families such as Ford, Gucci, McCain, Guinness, Gallo, and Redstone, Family Wars is an astonishing expose of the way families do business and how family in-fighting can threaten to blow a business apart. Whether it's Brent Redstone's court case with his father and sister or the family feud over Henry Ford's $350 million trust fund, the book reveals the origins, the extent, and finally the resolution of some of the most famous family feuds in recent history. Family Wars also provides valuable advice for anyone involved in a family business, offering suggestions on how to avoid such problems.


Perpetuating the Family Business: 50 Lessons Learned from Long Lasting, Successful Families in Business

-    John L Ward, Author

John L. Ward, a leading world expert on family business, offers the best practices of the most successful and long-lasting families in business, including Ford Motors, Marriott Hotels, Levi-Strauss, and the New York Times. He provides a framework of five insights and four principles in which to position his fifty "lessons learned" for family business longevity. This is a comprehensive book on sustaining family businesses that contains international examples, cases, essential tools, and checklists of best practices; a how-to every entrepreneur should have.

For more information contact The Law Offices of Colleen J. Watters at  cj@cjwatterslaw.com

In my experience, many business owners have not included language in their Business Succession Plan to address the needs of the business should the owner(s) become incapacitated or pass away. 

If the business formation is a sole proprietorship and the owner utilizes Schedule C for tax purposes, simply listing the business on the Schedule A of their Trust can be sufficient.   If the business is valuable, then a discussion regarding business entity formation is important, and assigning the business to the owner’s trust may be appropriate.  
 
Planning techniques are likely to have transfer tax considerations that must be evaluated by an attorney and a CPA.  Changes in tax laws, as well as the business owner’s estate value, may require ongoing reevaluation and potential adjustments to the plan by outside advisors.

As the “baby boom” ages, understanding a variety of approaches to planning for business exits and succession planning will grow in importance.  Approaching these strategies as a process and integrating a team of legal, tax, accounting, insurance, and financial professionals may help tax and legal professionals address the multitude of situations their clients may face.

When a business owner wants to pass his or her business on to children, they should be certain the children want to continue to operate the business before gifting it to them.

How children relate must be considered as well.  If children a business owner’s children cannot work amicably, a business may not be the proper forum to attempt to force them to work together. Family behaviors and personalities can be an important part of this decision that organizational psychologists and other management professionals specialize in consulting with people regarding business family dynamics and succession planning.

Whether the next generation wants to be involved in the business and whether they will treat the business as a “sandbox” to play in or a “golden goose” to be nurtured and valued must be considered before the decision to pass on a business is made.

Recently I have worked with several business owners that are working on a succession plan for their business. This type of planning does not only include estate planning, but must also include business planning. The article below, written by Rebecca Abrams Sarelson, contains valuable information to consider when planning for the future of your business.
  
5 strategies for better business succession planning

Rebecca Abrams Sarelson, Contributing Writer
Jan 29, 2015, 9:07am EST

In order to develop an effective succession plan, business owners first need to realize that there is no single approach to succession. Here are some strategies that can help set your direction.
When contemplating retirement or simply the possibility of stepping aside, owners of thriving small businesses often feel challenged when planning for the continuation of their businesses.

In order to develop an effective succession plan, business owners first need to realize that there is no single approach to succession.

What may work for one business may not be effective for another. But here are some general strategies that can be helpful for getting started:

1. Articulate goals for the business
It can be difficult for business owners to be impartial, but take a step back and analyze the current state of the business, its prospects and key areas for expansion or improvement. That can provide a vital road map for the future.

2. Identify successor leaders
Business owners cannot assume that their children have the skills, experience or desire necessary to ensure the continued prosperity of the business. For this reason, consideration may have to be given to key employees. It is imperative that business owners make an honest assessment of each potential successor's abilities and talents and confirm willingness to lead the business. Business owners must devote themselves to train successors in all aspects of the business and the successors must be prepared to commit the necessary time and energy.

3. Establish decision-making policies
If one person cannot perform the tasks necessary to maintain the business, then clear guidelines for running the business must be established. The role each successor is to assume should be carefully articulated and a dispute resolution mechanism should be created.

4. Allow successors to assume responsibility
Many business owners struggle with turning over control. Allowing the successors to step in and assume responsibility while the owner steps back can be difficult. However, permitting successors to have an opportunity to undertake the responsibilities for which they have been trained creates a gradual transition that allows the owner to slowly phase out, while introducing new management to the employees and clients over time.

5. Document an estate plan
Making sure that the ultimate ownership vests in the successors must be documented in an estate and tax plan. Whether the owner should create a lifetime gifting program, purchase life insurance or implement other strategies should be discussed with an estate and tax attorney. In families with multiple heirs, careful consideration needs to be given to the division of the business and other assets amongst the heirs.

Ultimately, small business owners are not guaranteed that a family member or employee will be interested or qualified to assume responsibility for the business. Owners should keep in mind that the business may one day be sold. Keeping concise records may permit the owner, or the heirs, to sell the business at maximum value. A qualified estate and tax professional can assist business owners in facilitating tax advantageous business transitions or sales.

Rebecca Abrams Sarelson is a partner in Arnstein & Lehr’s Miami office. She focuses on international and domestic corporate transactions, taxation, wealth preservation, estate planning, tax-exempt organizations, and real estate transactions. Sarelson handles complex business and tax planning, plus she counsels clients in entity selection, joint ventures, general corporate and partnership matters.