Estate planning extends beyond wills, trusts, and the distribution of your personal property. If you own a business, you need to develop a succession plan. The statistics show that second-generation businesses are more likely to fail than succeed. These odds only increase when applied to third or fourth-generation businesses.
Pick A Successor
Do this early. There is nothing wrong with thinking about who will replace you as early as ten years before retiring or stepping down. Why? The earlier you develop a succession plan, the better the chances are for your business to succeed. Here are two reasons why:
- Someone can run the business if you can’t for an unforeseen reason
- You can develop your successor
Regardless of whether you built the business or inherited it, you have grown it. You’ve done so with an underlying sense of values. These have shaped your actions and your work ethic. Pass these on to your successor.
This is part of the new successor’s development. Training will be understanding the job and the role. When you feel the time is right, delegate tasks. You will still be responsible for the results, but you can oversee how your successor manages problems and challenges.
Why are we discussing how to pick a successor? Because this is the work that needs to be done before you can establish a business succession plan with your estate planning attorney. Maybe your successor cannot handle the responsibilities. Or maybe your successor wants to pursue a different career path. We’ve helped business owners choose a successor by talking through the pros and cons of the candidates and we can help you with that too. But at the end of the day, your choice of successor is highly personal.
Your business succession plan requires you to take an active role in the transition. There’s nothing wrong with giving your business to a relative—if this is the right person for the job. You hold a highly-skilled position within your company; chances are your choice of successor has not reached your level of expertise. It’s important to give yourself the lead time to let the right person develop the skill set needed to run your business.
How To Establish A Succession Plan
Here’s a great question to ask your attorney: what options and resources are available for me to incorporate a business succession into my estate planning?
You want to give your business the greatest chances of success. Stack the odds in your favor.
When you meet with your attorney, ask about what kinds of trust are available for you to choose from. The right trust can do the following:
- Minimize taxes
- Make transitions easier
- Help preserve the “company culture” and values\
- Ensure minimal disruption to business operations
There is an extensive list of options available to you to choose from. The right course of action will be the one that fits you and your business.
The Law Offices of Alexander Sherwood Keenan
Develop your business succession plan early. At The Law Offices of Alexander Sherwood Keenan, you can build this directly into your estate plan. Contact us through our website to schedule your consultation. We can also be reached at 845-345-2123.