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5 strategies for better business succession planning

6/4/2015

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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.


1 Comment
http://www.cjwatterslaw.com/blog/5-strategies-for-better-business-succession-planning link
5/1/2016 11:10:57 pm

The five strategies that you have mention here is totally worth to follow and I love to read this kind of post very I can learn new strategy so that I can extend my business at good level.

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    Colleen J. Watters is a dedicated estate planning and probate lawyer. She also specializes in special needs and pet care planning. A graduate of Lincoln School of Law, a member of the California State Bar since 2008, a native of Sacramento, an active volunteer with the American River Parkway Foundation and the Placer SPCA.

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