Article
Succession planning for your business: Plant the seeds for a fruitful future
Dec. 12, 2019 · Authored by Ryan Kuenzi
A version of this article was previously published in the December 2019 edition of Digger Magazine.
No matter how you’ve built and grown your business, there’s one milestone you’ll eventually approach: transitioning ownership to a successor. Whether that successor is a family member, management group, or a third party, succession affects your business, family, wealth, and future.
To be successful, your plan must be developed well in advance, regardless of when you’re planning to transition ownership — now or in 20 years. This will help ensure your business’ survival and provide a return on the hard work and time you invested.
Why succession planning matters
Few owners adequately plan the exit from their business. However, a succession plan is just as critical as a business plan. Succession plans map out the transfer of ownership, allowing for a business’ future success and helping business owners achieve personal goals.
Succession planning is also critical for avoiding undesirable transfer or succession results and, the sooner planning begins, the greater the likelihood that your business and personal objectives will be met. Without a succession plan, creditors and others will create a plan for you, or the federal and state government may take a large portion of your business assets to satisfy estate taxes.
However, many business owners avoid planning for succession because the process can bring up personal sensitivities, such as family dynamics, retirement, or mortality. This can result in inadequate succession planning that reduces future taxes but doesn’t fulfill the owner’s vision for the family and business.
Great succession planning takes the needs of the business, owner, and family into account. When done well, it can empower you to build a lasting legacy.
Five key elements of succession planning
A thorough succession plan will address the following five elements. For each of these areas, it’s important to evaluate your current plans and determine if any areas require long-term assistance or immediate action.
- Business Finances: Securing and growing your company’s transferable value
- Personal Finances: Creating sufficient personal liquidity and net worth to fund your lifestyle and tend to your family’s needs and interests
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.