A succession plan is an important plan for any business owner to have in place. Not only can it help to secure the business and provide a smooth transition of power, but it can also set retirement allotments for the owner, as well as secure payment for the family when the business owner dies.
In order for a succession plan to fulfill all of its purposes, it must be set up properly. There are a few key considerations that business owners should know as they orchestrate their plans.
Needed documents
Many individuals know they need to cover their assets after they pass, but some do not contemplate incapacitation. This is particularly important for business owners, and living trusts may help to provide the security they need. For those business owners who have several partners, a buy-sell agreement may be necessary.
Possible transfer issues
After an individual passes, the family is usually left to either terminate or maintain his or her affairs. When this includes a family-owned business or substantial business interests, it can be quite challenging without the proper elements in place. A solid succession plan should not only include who the business should go to, but also how to deal with outside parties. Whether or not the next of kin has been working in the business or not, a day-to-day operations breakdown may help to ensure the party is able to fully step into the shoes of the deceased business owner.
Tax considerations
Estate taxes can take a large portion of the inheritance that a business owner intends for loved ones. To avoid this, it is important that individuals understand the estate tax laws of their state and any applicable tax breaks. A knowledgeable attorney may be able to help uncover all of the ways to protect an estate.
These are a few of the key considerations that a business owner should be aware of. Someone who is planning or revising an estate plan should take some time to consider these elements and any others that may affect the estate.