Many entrepreneurs in Connecticut envision a day when an heir will take over the business they build from scratch. Business owners who include a succession plan as part of the estate planning process should carefully consider a few points when planning to leave a business to someone close to them.
Business structure and tax implications
One point to keep in mind when planning the transferal of business interests as part of the estate planning process is that managing and owning a business are different things. It is quite possible to transfer managerial responsibilities to one child and allow multiple children to share business ownership.
The importance of planning early
Entrepreneurs should complete a business succession plan sooner rather than later. This action facilitates a smooth transition of ownership and responsibilities. Some experts advise that new entrepreneurs craft a succession plan while in the business planning process.
Family discussions
Estate planners who keep their intentions private before announcing a secession plan to family members are sure to instigate some degree of discord. A series of family discussions before any final decisions happens will foster goodwill and help ensure that the group reaches the best decision. These discussions will determine who wants to become directly involved with running the business and which family members possess other interests.
The need for practicality
Estate planners may want to leave the business they started on their own to a particular child, but if that child does not have the skills or inclination to continue business operations, this idea could end with disaster. A more capable family member should be the choice to take over business operations. It is important to weigh all strengths and weaknesses of everyone considered while planning business succession.
Put the business first
Thoughts of everyone sharing equally in a family business sounds nice but will mean nothing if the business venture fails. More capable family members may deserve more of a share of the benefits if they demonstrate the ability to facilitate business success. Estate planners should keep business health at the forefront of their minds when making these vital decisions.
Starting a new business is filled with complications that may become difficult for inexperienced entrepreneurs to navigate alone. A business attorney may prove beneficial to helping a startup business owner achieve success.