Someday you may pass your business on. You’ll need a plan in place when you do.

SUCCESSION PLANNING TO THE NEXT GENERATION

Your business represents the body of a lifetime of work and whenever possible, you would like to have your business outlive your management or your death. One of the best ways to ensure that your business is still viable well into the next generation is through successful succession planning. A well-thought out succession plan can make a significant difference in the future of your business.

FACTORS TO CONSIDER WITH SUCCESSION PLANNING

Family business succession planning requires a great deal of thought. Additionally, it is possible to hurt feelings of other family members if they do not understand the thought process. There are various levels of a business that will require specific talents; planning for these levels is a prerequisite to ensuring the longevity of the business. These areas include:

  • Business ownership succession – while it may be less painful to simply leave a business to a surviving spouse this is not always the best option. Ownership changes could require not only a transfer of ownership but, may also include buyout agreements, implementing a financing option and developing a plan for income for retiring owners.
  • Business management succession – business owners are not always the same as business managers and this can often create problems in family-owned businesses. Some family members may have the skills needed to manage a business while others may not. Having a strong management plan in place is a necessity.
  • Active versus inactive roles – family-owned businesses often have hands-on and hands-off stakeholders. Defining these roles, in a succession plan, can help avoid disputes that may develop once ownership and management change hands.

THE FINANCIAL SIDE OF SUCCESSION PLANNING

As with any other type of estate planning, succession planning involves some financial decisions. Some of these include:

  • Estate taxation – if your succession plan is designed to be implemented upon your death, there may be estate taxes to consider.
  • Buyout agreements – in some cases, a succession plan will require a buyout of managers or other business principals. This will require a business valuation in order to ensure fairness.
  • Transfer of stock or interest – when there is a stock transfer there may be delays that could have financial implications.

THE PERSONAL SIDE OF SUCCESSION PLANNING

A well-thought out succession plan is necessary to ensure business continuity. However, there could be inter-family disputes as to which family member will assume what role. There are some options that can help mitigate these disputes before they get started. Some of the suggestions that can help include:

  • Discussing options – family members should have some input into the overall succession plan. This will allow them to understand the thought process behind decisions.
  • Start transitions early – there is much to be gained by early training and exposure to the roles they will assume once the succession plan is in full force.
  • Addressing concerns – it is far easier to address family concerns before a plan is anticipated to go into effect versus waiting until the plan is in full motion.

Whether you are just starting a business or your business is well-established, a succession plan is as important as your business plan. At Solomon Richman, P.C., we will work with you to ensure that you have a well thought out and thorough plan to help strengthen the future of your business.

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3000 Marcus Ave., Ste. 1E5 Lake Success, NY 11042
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EMAIL: frichman@srlilaw.com
CALL: (516) 437-6443

SOLOMON RICHMAN P. C.

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