Owning a business can be an incredibly satisfying and fulfilling experience. You’re likely proud of your company and of the growth you’ve made since the beginning. The idea of leaving your business behind can be emotional and challenging, but there comes a time in all our lives where we must prepare for the future.
Creating a succession plan for your business is a key component in ensuring that your business will remain as you want even after you pass.
Who should I choose as my successor?
The first question you should consider is who will own the business after you. Are you passing it onto a son or daughter? Do you have a co-owner who is interested in keeping the company?
You may have multiple people who are interested in owning the business in the future. It’s essential to take the time to thoroughly vet each of the potential successors to decide who is most capable and willing to continue the business.
How can I transfer the business?
When it comes to passing on your business, there are a few options available. Any of these choices offer a good foundation for your succession plan and should be included in your overall estate plan.
- Use a living trust – You can create a living trust that will allow you to name the successor as the trustee. Living trusts will enable you to continue running the business as is while you are still physically able, but upon your death, the ownership of the company will effectively transfer to the trustee without any hassle.
- Sell the business – For a direct way to pass on your business, you can sell it outright to another buyer. This is ideal in situations where none of your heirs want to continue the company, or you do not have a co-owner. Establish the conditions of selling your business to an outside buyer in your succession plan and include how the resulting income will distribute to your heirs.
- Use a buy-sell agreement – In situations where you may have a co-owner, a buy-sell agreement is an ideal way to pass the business onto that partner without any added difficulty. You and your partner can create the terms of your agreement, such as the price upon which your partner can buy out your share once you pass.
No matter which option you choose for your succession plan, the bottom line is clear: you are ensuring the future of your business. Succession plans offer plenty of benefits such as maintaining brand identity, consistency and security.
Instead of leaving your business to fall into the hands of someone you don’t trust, a succession plan guarantees that your business will continue the way you want.