If you’re like most business owners, you pay a lot more attention to immediate concerns like a stable balance sheet and healthy cash flow. Retirement seems like such a remote concept right now. However, putting together a solid business succession plan should be done sooner rather than later: most experts believe that succession planning should begin anywhere from 10 to 15 years before your anticipated retirement. This article will take you through the 5 keys that are essential to creating a plan that will keep your business strong long after you’ve handed over the reins.
No. 1: Choose the best successor
For many business owners, the first impulse is to leave their company to a family member, such as a spouse or child. You need to honestly ask yourself: does this person really want the responsibility? Or do their priorities seem to be elsewhere? If so, a key employee who has supported your success for years would be a more logical choice.
No. 2: Prepare your successor
To ensure that the company is capable of running successfully after you exit, spend time preparing your successor for their future responsibility. Provide all necessary training and give them the opportunity to develop the requisite leadership experience. You can even solicit this person’s input in the development of the succession plan.
No. 3: Create a sound buy-sell agreement
A buy-sell agreement (BSA) is an invaluable asset when it comes to smoothly transferring a business to its new owners. BSAs usually become active when you retire, become incapacitated, or pass away. A business planning attorney can help you develop the best plan for funding the purchase, such as using personal funds, making installment payments, or using life insurance.
No. 4: Document the plan
After conferring with a business planning attorney, document how you plan to transition your company. This outline should include developing a buy-sell agreement, selecting the right amount of insurance, and reducing tax implications by taking advantage of available valuation discounts. Confirm that the succession plan is in accord with your will, insurance policies, asset titles, and other estate planning documents.
No. 5: Review the plan on a regular basis
Once you’ve come up with a business succession plan, don’t simply lock it in a safe and forget about it. Circumstances change: your chosen successor may depart, tax laws may be amended, and other events can occur that make an update and revision of your plan advisable.
Speak with a New Jersey Business Planning Attorney Today
The Matus Law Group has years of experience in recommending solutions for your business succession needs. Allow us to work with you to create a strategic and effective business succession plan while ensuring that all necessary steps are taken for the benefit of you, your successors, and your business. For help now, please call our firm at (732) 281-0060.