Planning for the future is a vital part of doing business. While you cannot predict the future, a succession plan can help you prepare for it. By having a succession plan in place, you and your employees can rest assured that your business will be taken care of after you are gone.
What is a Succession Plan?
A business succession plan defines who takes over the business from both a management and ownership interest perspective. You need a succession plan in place in the event of your retirement, disability or death.
Why Do I Need a Succession Plan?
With a clear succession plan, you can be confident your business will survive when you are no longer at the helm. A succession plan facilitates your retirement and keeps the company and its employees from experiencing undue stress. Succession plans may also minimize capital gains, estate and income tax liability.
Steps to Develop a Business Succession Plan
- Start early. Make your succession plan sooner rather than later. You do not want to rush the process of creating a succession plan right before your retirement. Instead, take time to craft a thoughtful plan that allows the business to thrive.
- Meet with your advisors. Before creating a succession plan, you will need to meet with your attorney and financial advisors to make sure the plan is comprehensive and legal.
- Choose your successor. There are several factors to consider when choosing a successor. If you plan on transferring ownership to a family member, evaluate whether they will be able to handle the responsibility of running the business. You may also consider developing a formal training plan for your successor.
- Update your business valuation. It is important to have your business valued on a regular basis. It’s generally wise to engage a third-party to get an accurate business valuation.
- Revisit your succession plan. While you should start the succession planning process early, revisit the plan regularly. Circumstances may change, and you will want to update the plan to reflect those changes.
By being proactive in developing a business succession plan, you can be confident your business will survive – no matter what the future may bring.
Fifth Third Bank does not provide tax or legal advice. Please consult your tax adviser or attorney before making any decisions or taking any action based on this information. This information is provided for educational purposes only and does not constitute the rendering of tax or legal advice.
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