Business Estate Planning: Simple Steps in Effective Succession Planning

An overall estate plan in business includes succession planning, and this must be carefully made a financial advisor. Succession planning is a legal process by which you hand over business responsibilities to another person in the event that you are no longer capable, or willing, to do your obligations. It is recommended that you do succession planning in advance. This is to enable you to effectively choose who will eventually run or inherit your business. 

Timeline 

Before anything else, you have to make a timeline on the most probable date that you will hand over your enterprise. This may be quite difficult at first, but nonetheless try to estimate when you would want to transfer and assign authority to people working for you. In the timeline it should also be clear as to when you will most probably finish the process of succession planning. 

Another principle behind making a timeline is to have a good gauge of how long you can provide training to the people who will run your business once you are gone. This is to ensure that your company will still have high chances of being successful even after you delegate tasks to someone else. You have to spend time and effort in training your prospective successor. Transitions and changes can sometimes be a little rough, so you have to make sure that you train your successor the best way you can. 

Choosing Your Successor 

After you have made a clear timeline, the next step is to appoint an individual or a group of people to manage your business. The key here is to list all your potential candidates and not just one person. Of course, you might already have a first choice and your best bet. However, this person might not accept your offer or may eventually leave your business and not take responsibility. For this reason, it is wise to have not just one, but two or more candidates. 

One important basis when choosing a candidate is to observe if the person has the same vision as yours regarding your company’s direction. This individual must have excellent business skills, be well-experienced, and has proven to be an inspiration to other employees and to the company. 

In addition, when appointing multiple successors, you have to immediately give specific assignments regarding the tasks they have to perform. This way, one will not argue with the other when conflicts arise, because you have made clear designations of responsibilities. 

Actual Transition of Ownership 

Now that you have everything in place—your chosen successor/s and timeline—the next step is to consider your alternatives of actually transferring business ownership. This is when your financial advisor can be of great assistance to you, as he is knowledgeable about gift tax and estate laws in your state of residence. Make sure to go through this meticulously, so that your successor need not worry about tax burdens. Otherwise, your successor might not be able to manage well, and thus, risk your business into a financial downfall. 

Then, make an accurate valuation of your business. Discuss with your financial advisor transition options such as gifting and buy/sell agreements.