Business Succession Planning
Effective leadership is key to the success of any business. Many small and medium-sized businesses need assistance to plan for what happens when that leadership unexpectedly changes. Effective business succession planning ensures a smooth and seamless leadership transition so that your business does not miss a beat. Our firm can assist you with developing a strong leadership structure that can responsively adapt and transition.
Why Do You Need a Business Succession Plan?
Business succession planning's objective is to ensure that the business (as an asset) isn't lost because of the owner's incapacity or death. It involves creating a contingency or business continuity plan that identifies key employees or advisors to keep the business going while the owner is disabled.
Succession planning also aims to create a plan for the business to survive the owner's death and provides a plan for the owner's family to continue growing the enterprise or harvesting its value. Business owners use key employee insurance to facilitate succession planning. Key employee disability and life policies pay the business when the owner (key man/employee) is disabled or has died. The insurance funds are used to fill the gap created by the owner's absence, whether to hire a capable business manager to run the business or to buy out a deceased owner's interest in the business.
The point of it is to protect the business as an asset. Unfortunately, too many overlook the vital role a business owner plays in ensuring that a business survives. Typically, the owner is to the business like our hearts are to our bodies. Generally speaking, those that protect their hearts live longer than those that don't.
Why Business Owners Should Prioritize Succession Planning
Many small-to-medium-sized businesses are totally dependent on the competency and well-being of the principal owner. When bogged down with the day-to-day work required to keep the company functioning at an optimal level, there is often limited consideration given to the owner's inevitable "exit strategy." This failure to plan can result in a missed opportunity for transferring the business at minimum transfer tax costs in the form of estate and gift taxes (if applicable.)
Family businesses (which typically hold most of a family's wealth and legacy) encounter this issue quite often. Some owners procrastinate and fail to design and implement plans to pass their companies along to someone else. This occurs for numerous reasons. Some of the most common are: the owners want to retain control of their business for life, or they want to avoid family conflict that might occur if family members do not receive what they feel entitled to; owners have to balance reducing their daily contributions to the business with ensuring service levels are maintained, and they have to determine the best way to leave a legacy for their families while securing an adequate income stream.
Ready to Find Out More?
For counsel who can effectively guide you through the succession planning process and who can fight for you when disputes arise, turn to the Law Offices of Charles R. Frazier. To schedule a low-cost consultation, call 615-267-0125.