You have seen this scenario a million times in the movies. Hollywood paints a picture of the family patriarch who owns a successful business. The business owner wants the company to continue flourishing after his death. The tables are turned when there is no solid succession plan, and drama (or comedy) ensues.
No Drama
No one likes the thought of drama or comedy happening after their death, much less the thought of an uncertain future of a family-owned business. Succession planning for the family business owner is an important aspect of estate planning. Many family-owned businesses are focused on the execution of running their business. They are deep in the moment, not visioning toward the future. A family-owned business is an opportunity to leave a legacy when succession planning is done with care. A business is set up for failure if a plan is not in place when it is time for the owner to relinquish control.
A succession plan for a family business owner is just as important as a Last Will and Testament in your family estate plan. A succession plan becomes an integral part of your final wishes. When working with an estate planning professional, they can help you avoid some common pitfalls with a secure plan for your family-owned business.
Act now
Procrastination is the first pitfall of good intentions for a succession plan. Family business owners may continue to delay, thinking they need to make a plan, but they will do it later when they have time. You have invested a great deal of time, energy, and money into your family business. A succession plan as part of your estate plan must be a priority to protect your family-owned business. To be most successful, you must make a plan, communicate it to affected parties, and develop plans so that the future owners will succeed.
Equality can be tricky. Parents may make the mistake of assuming their children will become equally responsible business owners. If you don’t develop and communicate a succession plan, you may set your children up for failure. If equality is your concern, an estate planning professional can help. Determining equitable distributions for your children while developing the best succession plan for the future of your business is key.
Time is also an investment. When you began your journey as a business owner, did you know everything, or did it take time to develop your business skills? Take the time to share your knowledge with your successors. As a business owner, you are the expert, and you have an opportunity to train your successor to ensure future success. Even if the chosen successor has worked in the business, leading the business is a different role.
Consider the years you have before retirement as an opportunity to prepare, train, and mentor your successor. An estate planning professional can help you secure all of your plans for your estate and your family-owned business. A solid estate plan paired with a well-constructed succession plan will ensure your final wishes for a lasting legacy.
