BUSINESS SUCCESSION PLANNING–WHAT IS IT?
Consider this scenario: You’re part owner of a thriving small- to medium-sized business. You handle certain key responsibilities and rely on your partner to handle others. While your partner is away on business, the phone rings. The shaky voice at the other end of the line informs you that your partner has been fatally injured in a car accident. You’re grief-stricken.
When it comes to any business, wishing upon a star won’t ensure its future. Historically, remember the case of Michael Eisner (past chairman and CEO of The Walt Disney Company). First, Eisner’s “second-in-command,” Frank Wells, died in a helicopter accident in Nevada. Then, four months later, Eisner underwent quadruple bypass surgery.
- Start now—address the issue of business succession—don’t put it off!
- Call in your business planning and estate planning team: attorney, accountant, tax professional, and insurance professional.
“The Future is Now” When it comes to your business, hoping for the best won’t ensure its future. To illustrate the point, let’s take a look at the hypothetical case of John Wilson. John spent 30 years building an automotive tire sales giant, Wilson’s World of Wheels, Inc.
If you are getting ready to retire and thinking about selling your financial firm, you have to decide how much your business is worth, and it can be challenging to put a number on something you've been building for your whole life. Ultimately, your business is worth as much as you can convince someone to pay you, but what should you consider when looking at offers?
When you work for an employer, saving for retirement can be as simple as signing up for a 401(k) plan and making regular contributions, but when you own your own business, preparing for retirement can be more challenging. While pouring decades of your life into your business, you need to make sure you're also thinking about what will happen when you retire.
Many owners of family businesses are so busy running their companies that they never get around to making formal arrangements to pass on the business to the next generation or to other partners.
A business will is far more than a legal document designed to transfer assets upon the death of an owner or partner. It is a comprehensive estate planning tool that can include everything from management plans, and other documents necessary for a company’s continued operation and future health, to shareholder buy-sell agreements.
When developing a succession plan for your business, you must make many decisions. Should you sell your business or give it away? Should you structure your plan to go into effect during your lifetime or at your death? Should you transfer your ownership interest to family members, co-owners, employees, or an outside party?