Family-owned and small businesses carry a sense of pride and familiarity, not just for their proprietors and employees, but for their patrons as well. But, the sad fact is that many of these types of businesses do not make it past the second or third generation of ownership due to a lack of specific planning as to what happens after the original owner retires or passes away. That’s why small business owners need to create a business succession plan to ensure the business they worked so hard to build and maintain can continue on after they’re no longer running it. Here are the three steps you should follow for a solid business succession plan:
A business succession plan is a way for the ownership of a business to pass from an owner to a buyer, with protections put in place for both parties. There are many things small business owners must take into consideration, such as the taxes a new owner may face following the succession and family strife that could arise when transitioning to the new ownership. It’s also a wise idea to create a succession plan early on in the life cycle of the business as illness, incapacitation, or death can occur at any time.
Make Your Wishes Known
Small business owners need to make their wishes known for who should take over the business. The business owner should decide whether their operations will stay in the family, transition to a business partner or employee, or be sold to an outside third-party.
Prepare for the Long Term
A solid business succession plan can take time to create, sometimes evolving over months and years. Some of the tasks that will need to be dealt with include assembling a transition team, making sure the proper documentation is in place, and receiving sound financial planning. All of these pieces must be managed carefully to make sure the business remains viable and profitable while also making sure both the seller and the buyer are well-protected. If any of these pieces are handled incorrectly, a great deal of time, money, and resources can be lost, which could impact the business’ chances for surviving the transition.
If you have any additional questions about business succession planning, or if you’re interested in creating a plan for your business, please contact our Ohio estate planning and elder law office at 877-653-3450 to schedule a complimentary initial consultation.