Succession planning for a business is a lot like estate planning is for your family. For many, business and personal lives are so intertwined, that planning for one is linked to planning for the other. Like estate planning, it is not something you want to put off doing to a later date.
No one knows what tomorrow holds. An illness or accident can disable a business owner — or worse — leaving co-owners, employees and shareholders without a clear direction to take the company.
Business benefits of succession planning
Good succession planning goes beyond simply appointing a successor and handing over the corporate checkbook. Trusts, wills, powers of attorney and other estate planning tools will help you:
- Provide clear options for heirs and successors: For example, a buy-sell agreement decreases the chance of someone becoming an unintentional and ill-equipped co-owner.
- Promote long-term success for your business: A serious illness or a death should not lead to the downfall of the business.
- Reduce confusion by those left behind: If no one knows what to do once the captain of the ship is gone, the ship may sink because of unanswered questions.
- Give your company a goal to reach for: A clear plan of action allows you to identify steps the business needs to take to over the next number of years.
Hold the reins lightly
No one wants his or her business decisions and actions dictated from beyond the grave. What may seem to be the best course of action to a business owner while he or she is still alive may not be best for the business six months later. Tying the hands of beneficiaries or successive owners can cause dissension and, even worse, can cripple a formerly successful business.
Refusals to surrender control of money and assets plague businesses and families alike. Seek professional assistance when establishing an estate plan for your family and your business, and obtain peace of mind about the future of the business you worked hard to build.