Business succession planning is what you do when you are preparing to pass your company on to the next generation. This shouldn’t be a spur-of-the-moment decision, such as deciding to retire and handing your business over within the span of a week. It’s something you want to plan for in advance.
Many experts suggest starting business succession planning as much as five years before the transfer. It takes time to carefully consider all aspects, select the appropriate successor, determine precisely how business ownership will be transferred and get everything in place.
Most importantly, you want to work with the potential successor in advance. Starting five years early gives them time to serve under you and learn how to run the company. Since you are still technically in charge, you can help them avoid mistakes as they learn the ropes. This will make the eventual transition go more smoothly.
Avoiding complications
Starting early also gives you a chance to avoid potential complications. For instance, maybe you are passing the business to multiple adult children who will all be working together. This can lead to disputes over ownership percentages, decision-making power, roles, responsibilities and much more.
If you transfer the business at the last minute, disagreements may arise and tensions could grow between siblings. But if you start well in advance, you can work with them to establish clear expectations, resolve potential disputes early and ensure a smooth transition.
Business succession planning is crucial for the future of both the company and your family, so be sure you understand all of your legal options.
