If you’re a business owner who is considering your estate planning, a major focus of this process may be business succession planning. You have to decide what is going to happen with the business in the event of your sudden incapacitation or death, as it’s probably one of the most valuable assets that you own – if not the most valuable by a wide margin.
Of course, some people plan to sell their business and put the money that they earn into their estate plan before they pass away. Others, who perhaps own a small, family business, shut it down when it’s time for them to retire; they may not have any heirs who are interested in taking over. But in many cases, the plan is for the business to outlast the founder. It’s going to be handed on to their children and the next generation. This means planning for things like determining what roles everyone will have in the new business, training people to take on those roles, deciding how to divide up ownership percentages, determining which heirs even want to be involved, etc. When should you start this process?
As soon as possible
Generally speaking, it’s best to start succession planning as soon as you know which approach you want to take. There’s no reason to delay. If anything, this process takes longer than people assume, so starting early is to your benefit.
Being proactive can also help the process go more smoothly. As noted above, it takes time to train workers and heirs so that they can take on these roles and figure out what they’re going to be doing within the company. If you simply leave the business to an heir one day and expect them to take over, it could be very difficult for them to do so. But if you bring them in three years before and let them work under you so that you can train them on the job, the actual transition can progress much more smoothly. Similarly, if you plan to have the business sold in the event of your death, working out the details of how it should wind down can help stakeholders to understand what is expected of them when the time comes.
As such, you don’t want to delay estate planning or business succession planning. Be sure you know exactly what steps to take to get this process underway by seeking legal guidance accordingly.