Family businesses require comprehensive estate planning.
They provide quality products and services to communities as well as income and skills to future generations.
Starting a family business takes perseverance and passion.
Running it takes daily attention to detail.
According to a recent The Times Reporter article titled “Succession planning for family businesses,” all your work could be lost if you fail to create a business succession plan.
What is business succession planning?
A business succession plan allows the owners and operators of the business to outline what their role in the business will be after they retire.
It also allows them to select new leadership and provide rules for how the business is to operate.
Because a family business is a significant source of wealth, business succession or the sale of the business should be included in estate planning.
What steps should those who run a family business take to create and implement a plan?
Begin by identifying a buyer.
This buyer or these buyers may be family members, loyal employees, or current business partners.
Once you have designated new leadership, you should create an agreement.
Include your estate planning attorney, financial advisor, CPA, insurance agent, and a few trusted employees.
The business should be assessed by a qualified and accredited valuation professional.
Evaluate the income you as the owner of the family business will need to maintain your current standard of living if you are selling the business.
When selling the business, you need to also consider tax implications and what estate planning strategies can be used to reduce tax liability.
If a non-family member purchases the business, you will need to take into account how this will impact family members who are currently involved in the family business.
Business succession involves developing the blueprint of the sale, creating a timeline, and executing the appropriate legal and financial documents.
Regular meetings with the new owners can create a more seamless transition.
Owning family businesses is often steeped in sentiment.
It is challenging to let go of what you have built.
For this reason, many people who own a family business do not create an estate plan or a succession plan.
Unfortunately, this triggers significant problems.
With no plan, the business will likely die with you and leave your loved ones hurting financially.
Start taking steps now to secure the lasting legacy of your family business.
Reference: The Times Reporter (March 7, 2021) “Succession planning for family businesses”