Family Businesses

The Importance of Business Succession Planning

• Allocating value and/or control
• Ongoing business management & incentives
• Identifying potential buyers and/or beneficiaries
• Determining business ownership and asset transfer strategies
• Strategic tax planning

Our Comprehensive 5 Step Succession Consulting Process

Even the most committed business owners need to create viable transition and exit strategies. Often times, a company’s success and value are derived from key individuals, their special talents, and the contacts they have made over the years. Ideally, successful business owners should allow five to ten years to properly plan for the successful transition of their business to future owners and managers. Given adequate time and proper planning, a business succession plan can be implemented successfully and often profitably. We will help you. We have created FIVE ESSENTIAL STEPS to help our clients develop a family business succession plan:

STEP ONE is to determine the business owner’s long-term goals and objectives for the family business and a timeline to begin planning from.

STEP TWO is to determine the financial needs of the business owner and his or her spouse, and to develop a viable plan that ensures their financial security.

STEP THREE is to determine who will manage the business, and to then develop the management team. It is important to recognize that management and ownership of the business are not the same. The day-to-day management of the business may be left to one child, while ownership of the business is left to all of the children (whether or not they are active in the business). It is also possible that management may be left in the hands of key employees (or outsiders) rather than family members.

STEP FOUR is to determine who will own the business and how to transfer (gift, sell, or devise) the owner’s interest in the business to the “new” owner. Most business owners would prefer to leave their businesses to those children who are active in the business but would still like to treat all of their children fairly (if not equally). Yet, many business owners lack sufficient non-business assets to allow them to leave an equal share of their estate to the children who are not active in the business (the “inactive” children). Thus, a business succession plan must provide a means of transferring wealth to the children who are not interested in, or not qualified for, continuing the business.

Two other issues concerning ownership must be addressed. The first is whether the business owner will continue to receive income or other economic benefits from the business after the transfer of ownership. This, of course, will depend on the financial needs of the business owner and his or her spouse, as well as the method used to transfer ownership of the business. The second issue is whether the business owner will continue to control the business after the transfer of ownership is complete, and for how long.

STEP FIVE is to minimize transfer taxes and to prepare an appropriate estate plan. Estate and Transfer taxes alone can claim up to 55 percent of the value of the business, frequently resulting in a business having to liquidate or take on debt to keep the business afloat. To avoid a forced liquidation or the need to incur debt to pay estate taxes, there are a number of lifetime gifting strategies that can be implemented by the business owner to minimize (or possibly eliminate) estate taxes. We will work closely with your accountants, financial planners, insurance professionals and other professional advisors to achieve each client’s goals efficiently, with a focus on practical strategies and long-term benefits.

Whatever your succession goals, we have the experience to help you accomplish them.

Contact us today for an initial Family Business Succession consultation. We have helped numerous entrepreneurs build a successful business and profitably transition out of them. We welcome the opportunity to do the same for you. Call us today and ask to speak with our Client Services Director to help you get started.