Business succession can be an interesting and worrisome topic if you are an owner who is thinking of retirement in a few years. You have heard that wise owners will plan far in advance if they want to hand the keys of the company to their children. Unfortunately, although you know you need a plan, you have nonstop business demands as owner, president and CEO. Running the company takes your full attention, and succession planning gets shoved to the back-of-beyond burner.
All too often, the unthinkable happens. A permanently incapacitating illness strikes you, or worse, you suddenly pass away. You never made a succession plan; therefore, your business–the one you spent a lifetime of hard work to build–will move out of your family’s control.
What a clear business succession plan looks like
The first place to look for business succession examples may not be Washington, D.C., but it happens to be an excellent choice. Consider that, if the U.S. President passes away while in office, the Vice President is waiting behind the curtain to take over. If the VP is incapable, the Speaker of the House runs the country. If a national disaster has sidelined the speaker, the Senate’s president pro tempore is next in line, followed in order of rank by each cabinet secretary.
There is absolutely no hesitation over who will take charge if the country suffers a major catastrophe. The plan is clear to everyone concerned.
How to tackle the decision of ownership
When considering business succession plans, owners dread facing how to divide the company. Your business may represent the primary asset in your estate, so you feel the weight of creating a fair and equal distribution. How can you settle ownership on one or two people, yet be fair to everyone?
The best way to examine the transfer of ownership is to look at it as a business problem. Who, if any, of your relatives, has the desire, the ability and the vision to move the business forward successfully in the coming years? Perhaps you already know the answer, or you have a couple of people in mind.
Taking time to plan your business succession will allow you to maximize tax advantages and provide not only for your primary designees but create equitable family ownership such as gifting nonvoting shares. Do not forget a significant advantage: You can also include your own retirement income in a well-crafted business succession plan.