For many small business owners, their goal is to retire with the business going strong so it can continue under new leadership. If this is what you want for your business, you might consider business succession planning as part of your estate plan.
As the name implies, business succession planning is a way for a business owner to determine ahead of time who will inherit the company after you retire or pass away. How simple or complicated this process will be depends on whether you own 100 percent of the business or have partners if you have a successor picked out, and other factors.
Choosing your successor takes thought
If you are the sole owner of the firm and have a single successor in mind, succession planning can be fairly straightforward. But often, business owners are in partnerships with one or more parties. If it is a family business, they might have several children to choose from. If not, there could be more than one co-owner, executive or manager that has a case for being made your successor. This decision requires a great deal of thought and advice from your estate planning attorney.
Elements of succession planning
Once you have chosen a successor, succession planning can include:
- Training and support for your future successor(s)
- The timeline for delegating responsibility and authority to the successor(s)
- Whether to bring in outside directors or advisors to provide objective assistance
- How to retain employees during and after succession through compensation planning
With careful planning, you can virtually guarantee a smooth transition with a minimum of business disruption and hurt feelings. This is especially important when you are deciding between children or longtime workers to take your place. If you must choose one over the others, even for solid business reasons, the ones left out may object. But your attorney can help you plan in a way that minimizes the risk of a fight.