Family businesses have a personal commitment to success, yet transition of ownership is usually complex. To ensure the ongoing vitality of the business, owners must have a plan. If the business is going to stay in the family, naming the successor as early as possible is best for family relationships and tax planning. If the business will be sold, then the owner must make preparations to capture the highest value possible.
For the easiest transition, take the following steps:
- Start early. Even if you don’t plan to retire for many years, having a plan in place ensures that all parties know the business well enough to transfer control. Identify the person who will run the company, and identify roles for other family members who want to continue in the business. Well defined roles allow for expertise to develop, and set clear expectations.
- Planning well in advance provides the luxury of training the successor for running the business. More importantly, the successor learns how to think about and plan for future growth and expansion. A solid business continues to evolve with a successful transition.
- Consider a coach or team of advisors. A non-family member brings objectivity that can diffuse personal family issues when running a business or making succession plans. Likewise, having qualified advisors with or without industry experience brings fresh perspectives and insight.
- Understand options to minimize taxes. How the business transitions to the next generation has significant tax implications with regard to estate taxes. Know your options so that you can plan accordingly.
Taking care of the business and adding value benefits business owners regardless of succession. Read about 7 Ways to Get the Highest Price for Your Business, and rely on a Salmon Sims Thomas advisor for succession planning advice.