When the timing is right, every business owner faces the question of what happens next? You may think that preparing for this next step should be postponed, or that it’s not as important to plan for the future of your business, but that’s not the case at all.
As you consider what succession might look like for you, here are some initial questions to consider:
· What happens to our business when it’s time for me to “step off of center stage?"
· Will I sell the business to a third party?
· Will I sell the business to a group of trusted employees?
· Will I want the business transferred to my spouse or children?
These are all significant questions, with each requiring careful thought, analysis, and planning to achieve your desired outcome. Once you answer these questions, we can begin preparing the proposed succession plan, which will most certainly bring a new series of questions:
· What is the current status of the business? Are the structure and organization optimized to achieve a successful result?
· What is the value of the business? How is it determined, and on what basis is the future value projected if the proposed succession plan is adopted?
· What is the economic proposition of the proposed succession plan?
· How much time will the process require? (From our experience, the longer the time frame, the less strict the steps and more flexible the process can be.)
· How will the business be managed during the process? Will the owner still be involved in day-to-day operations?
· How will successor managers/owners be trained to assume that management/ownership?
· What needs and requirements of the business and its employees will need to be addressed?
· What are the capital needs that the business will need to put in place to insure continued sustainability of the business?
· What are the Federal, state, and local tax consequences of the proposed structure for the succession plan?
The answers to these questions require not only an understanding of the law and economics of a particular business, but also of how each step interrelates and potentially affects the desired outcome. A misstep or failure to consider all aspects of the succession plan will likely result in an unintended, unplanned for consequence.
Our firm specializes in just this kind of succession planning. Over several decades, we’ve curated succession plans for numerous businesses in a variety of industries ranging from simple to multi-layer complex. If you would like to discuss your thoughts, concerns, or questions, we welcome the opportunity to meet you and get to know your business goals.
Six helpful topics to consider for your end of the year tax planning.