Estate planning can be a complex problem, especially when it involves family businesses. It can be difficult to decide how to handle one.
Business owners do not need to consider just inheritance, they also need to think about what happens to the business. This is where succession planning comes in.
What is succession planning?
Succession planning involves deciding how the business continues after decease. This includes deciding who will take over its running. The goal is to ensure the business has what it needs to keep on after the primary decision maker’s passing. Succession planning is not estate planning and does not necessarily deal with ownership, which is part of the latter, though it can.
Key parts of succession planning?
Succession planning involves certain key steps. The first is to identify potential successors within the family who have the skills, experience and desire to take over the business. Successors need the opportunity to gain the skills and experience needed to take over the business. After identifying them, the owners need to provide it, whether that be formal education, on-the-job training and/or mentoring from him or herself or other senior leaders in the business.
After finding successors, the business owner needs to develop a formal succession plan. This plan should outline the transference of ownership and management responsibilities in the event of the owner’s death. It should also include contingency plans in case the chosen successor is unable or unwilling to take over. It is important to communicate the succession plan to all family members and key stakeholders. The owner also needs to create a business continuity plan outlining how the business will continue to operate in the short term if he or she dies before finding and training a successor.
Succession planning is important to ensure a smooth transition of ownership and management in the event of the owner’s death, retirement or disability. Without it, businesses stand to lose a great deal.