For business owners who are looking into estate planning, business succession planning may also be necessary. This creates a plan to pass the company ownership on to the next generation. This may be done when the business owner passes away, but it will often be done well in advance.
This type of succession planning can cause disputes, especially when the family business is one of the biggest assets in the estate. The following tips can help business owners make a plan that will work for their families.
Consider everyone’s role
If you are considering leaving the business to multiple beneficiaries – such as three adult children – consider what roles they should have within the company. Ownership does not have to be divided equally. Try to find positions in the business where these people can use their strengths – and where their weaknesses will not hold the company back.
Start training in advance
Even if you’re just leaving the business to one person, work on training them before they take over. You may want to elevate them to an executive role years before they become the business owner and CEO. They can work directly with you and learn the ropes so that they don’t have to do it on their own.
Leave clear instructions
Many estate disputes happen when family members just disagree about what the other person would have wanted. If you leave clear instructions regarding who you want to be in control of the business and how the transfer of ownership should go, you can prevent some of these disputes from ever taking place.
Planning in advance is the key to effective succession planning. Make sure you know exactly what legal steps you’ll need to take.
