Whether you are the third generation of your family running a business or you started it yourself, the company probably has significant financial and emotional value to you. It is common for business owners to have strong preferences about who will inherit the business or take it over when they are no longer able to run the company.

It is usually best to start planning to transfer the ownership of your company well before you die, but there’s no way to predict if you could experience a sudden health event or accident earlier in life. Addressing the transfer of ownership in your estate plan while also planning to manage the process in person if possible is a smart move that can protect you and the company. How do you transfer ownership as part of a last will?

How you hold the company will impact how you transfer ownership

The process of transferring ownership will be substantially different for a publicly-traded corporation than for a privately held business where you are the sole owner. It’s important to know there will be different legal and tax implications.

If you are the only owner, you can likely bequeath your entire ownership interest to another individual in a relatively straightforward manner. If you are a partial owner in a corporate entity, more complex steps, such as the transfer of shares, will likely be necessary. 

Have you talked with the person you want to take over the company?

You may have always assumed that your oldest child or favorite nephew will be the one who assumes authority over the company when you either die or get to an age where retirement is your priority instead of continuing to run the business.

However, not everyone necessarily wants the responsibility involved in business ownership and management. Discussing your plans with the individual you hope to have taken over the position is a critical step. Much like with the selection of a guardian for a child, making sure that the other person is willing to take on that responsibility is a major part of the decision-making process.

Do you have what the new owner needs to learn available?

Learning how to manage a business can take months or even years depending on how complex the business is and how many different roles the owner has to perform. Written documentation explaining their responsibilities will help reduce the risk of transition issues when the next generation begins to take over the company.