Statistics show that only 30 percent of businesses make it through the second generation of ownership. This can be attributed to poor succession planning.
As a businessperson, your life revolves around the business. However, have you ever stopped to wonder what will happen to your business when you can’t make essential decisions anymore?
Apart from making these decisions, have you ever considered the fact that one day you might not be around to run the business, and someone has to take over it?
We have seen cases where an entrepreneur fails to create an estate plan and has his whole life’s work lost when he passes away.
We don’t want this to happen to you.
To keep this from happening, let us look at a few steps to rectify the situation.
Know the Value of Your Business
If you were to value your business today, how much would you estimate the figure at? A business valuation is a way to get some facts regarding the actual worth of the business, especially in terms of monetary value.
When you intend to pass on your business to another person, it is just right that you have an assessment done by a professional. This will give you the resale value as well so that you can decide whether the person you wish to pass the business on is worthy of such property.Draft a Business Succession Plan
You will often hear the word “succession planning” being floated around in business circles.
As a business owner, you need to have a succession plan so that you can transition your business to a new owner, preferably a family member, after you die or when you withdraw from the business.
The plan is a comprehensive document that includes a list of new owners, managers, and their duties. The aim is to identify a few people that can step into your shoes and run the business the way you need to do it after you become incapacitated.
The plan also outlines a few other things, such as how to transfer ownership when you aren’t in the capacity to run the business. It also describes how to bring in new employees, how to pay them, and the resolution of business disputes.
A succession plan needs to have an estate plan that identifies the different ways you want the property to be inherited when you pass on.
For more information regarding estate planning, contact us today.Have a Buy-sell Agreement
If you own a business in partnership with someone else, then it is prudent that you consider an agreement that describes what you own, how you define the business, and what should happen in the event of your death.
A crucial part of the agreement is to determine how to reach the business share, which is not such an easy task as it seems.Write a Will
Your succession plan won’t be complete without a will. This is the last testimony that lists the beneficiaries that will take over what you own in the business.
Additionally, the will allows you to name a representative to run the probate process and distribute the assets properly when you pass away.
Make sure you work with an estate planning attorney to come up with a comprehensive will for your estate. The document needs to make sure all your business assets have been assigned a beneficiary.Use a Living Trust
If I was to have a say in the estate plan that you are coming up with, then a living trust is the best way to go as a business owner. The document comes as a changeable (revocable) and unchangeable (irrevocable) type.
When you have a trust instead of a will, you enjoy various benefits. First, your beneficiary won’t have to go through probate to get the assets that you have allocated him. This allows them to avoid wasting a lot of time and reduces expenses.
The second benefit is that your case will not be public. Remember that the probate process is public, and all the documents that are involved are available to the public to scrutinize. Using a will avoids this hurdle.Final Thoughts
As a business owner, you need to make sure you have what it takes to determine your business succession. Remember that when you can’t make decisions, the business still needs to continue operating correctly. Enlist our services today to make sure you get your succession plan in motion.
