Succession Planning for a business owner is important because sooner or later you will retire or pass away. The issue is who will run your business and who will own your business after you are gone.
Management succession planning is the process of finding and training people to fill in key positions and roles for the future. A business should consider giving incentives to these key people to keep them in the business. Such incentives may include transferring ownership in the business over time, or granting stock options.
Ownership succession is planning for who will own your equity interest in the business. If you have multiple children, consideration should be given as to whether all children will succeed to your interests, or just those children who actively participate in the business. If you have a key employee or partner, should you transfer your ownership of the business over time to them? This may provide you a source of retirement income, while allowing them time and easing the burden on the purchaser.
Succession planning is tied in closely to estate planning. Yet, statistics show that about 20% of small business owners don’t have an estate plan in place. Succession planning is an important part of business. Putting it off can have dire consequences. Our attorneys can help you form a thoughtful and effective succession plan for your business.