Why is Planning for Business Succession Important?
You build your dream into reality with hard work, persistence and forethought. To safeguard your investment, your employees' futures, and remain a vital force in your community, you need to consider how to affect an orderly and affordable transfer of the business to the next generation or a key employee. A carefully designed succession plan will increase the value of your business while protecting your financial security in retirement.
Every succession plan should be formulated according to the unique circumstances of the business and the business owner. Still, there are several issues that will need to be addressed in all cases. Some of the major factors that a business will want to address include:
- the structuring of the proposed succession, including its tax consequences;
- contingency planning for unforeseen events and the drafting of the necessary documents to ensure that the business will continue uninterrupted;
- establishing a formal time for transfer of ownership and the delineation of transitional roles in the business for family members and key employees;
- communicating the necessary aspects of the plan to family members, third parties and employees;
- drafting or revision of key documents, including shareholder agreements, corporate restructuring plans, share transfers, insurance contracts, etc.
Although a succession strategy may consist of several legal documents, your overall perspective should be one of planning, not legalities. The purpose of a succession plan, after all, is to keep peace and harmony in the family, not simply to serve as an instrument to be produced during a heated court dispute.
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