Business succession planning is the process of determining how to transfer business ownership and relinquish your management role in the business. The business succession planning process can be very complex and personal, especially in a family business. Before a business succession plan can be outlined, it is important to consult with experienced business lawyers who will help you through the various factors that must be considered. Qualified business attorneys can streamline the process so that your plans and goals for the future are clearly defined and your family’s financial security stays intact.
Why plan in advance? Without a plan in place, an unforeseen event such as the death or disability of you or a business partner can have drastic consequences for your family. Planning ahead can ensure that you, your business, and family are protected. If you wish to have your business taken over by family members, you will most likely need to coordinate your business succession plan with your estate plan. Making sure your own finances are in order for retirement is integral to the process as well. Consulting with skilled estate planning lawyers about expectations, family dynamics, and goals for the future is essential when doing small business succession planning. Where do I Begin? Planning for you family’s financial security must include serious and open communication. Everyone who is involved needs to be fully aware of the current state of the business and plans for the future. You can prevent a lot of heartache down the road by creating a strategic plan that includes operating policies, a code of conduct for family members, and a consensus on what the family's role in the business will be. After determining a successor, develop a plan to transfer leadership, including arranging for successor training and setting a retirement date. Creating a Business Succession Plan A well thought-out succession plan can allow you to pass the business on to family members while minimizing and deferring tax liability. A variety of strategies can be used to pass on the business, including:
Some business owners wait until death to transfer their business interests to their children. A self-canceling installment note may also be used in a sale to family members. This option allows the balance of the note to be canceled in the event of your death. If you have a taxable estate, the children receiving the business may also need life insurance to pay estate taxes. Insurance policies owned by irrevocable life insurance trusts will allow beneficiaries to receive proceeds which are both income and estate tax-free. There is no “one-size-fits-all” succession plan that will work for every business. Plans are often adapted due to factors such as the market conditions, plans for expansion and health of the parties involved. Consulting with qualified and experienced attorneys in your local area can help you effectively pass your business on to your heirs and facilitate a smooth transition for both you and your family. Carosella & Associates, P. C. is one such firm located in West Chester, PA providing business succession planning services to its clients. #BusinessSuccessionPlanning, #SuccessionPlanning
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