On This Page, You can easily know about How To Plan Succession For A Family Business.
If you own a family business, planning succession is something you should begin sooner rather than later. The lack of a succession plan can have significant tax implications for members of your family, and subject your managers and employees to unnecessary risk. The sooner you plan succession for your family business, the more options you have to ensure everyone’s interests are protected.
What is succession?
Family business succession is the process of transitioning the management and the ownership of your business.
This process is both sensitive and daunting, especially for founders or senior leaders who often find it difficult to let go of the day-to-day management of the family business.
Despite common belief, it is useful to know that transfer of management does not mean transfer of ownership, and both transfers do not have to happen at the same time. What is key to a successful succession is planning and taking the time to do things properly.
Why THINKING about succession?
Family businesses are different from other types of businesses. This is because on top of business management and operations, family and ownership dynamics come into play.
To better understand this concept and its importance, it is useful to look at family business through a simple model.
Designing Your Succession Plan
Create a timeline for implementation. Your timeline ideally should include benchmarks for specific goals, as well as trigger events indicating it’s time to move on to the next step of the plan.
Particularly if your succession plan involves selling or gifting shares to other family members over time, you must have a schedule in place that details when those transfers will be made.
Implementing Your Succession Plan
Evaluate your plan on a yearly basis. A succession plan designed several years ago may no longer fit your goals or the needs of your business.
- Your plan may need to be revised to reflect changes in tax laws, business climate or conditions, or changes in personnel.
- Since you have a family business, changes in the family also may impact your succession plan and necessitate revision. For example, if your son and his wife were tapped to take over when you retired, you may have to revise that plan if your son gets divorced.