As a business owner, you know the value of your business as an asset. You also know that you want to put this into your estate plan or pass it on to your children in some fashion. This may mean creating a business succession plan for those children.
However, this is also your first time putting something like this together and you know that you don’t want to make any mistakes. Here are some tips that can help.
Decide when the transfer will happen
Some business owners decide to treat this like any other asset in their estate, and they determine that their ownership will pass to their child when they pass away. But many feel that this is far too late, and they would rather retire and pass the business on at that time. You can do anything you want, but you just need to know how to set the plan up so that it’s ready.
Ask the heirs if they want it
You never want to assume that your children actually want your business. They may have no interest at all in taking over. They may have their own careers. You absolutely want to have this conversation first, because you may need to pick a different successor – such as an employee – if your children are not interested.
Start as early as you can
Once you decide who you’re going to pass the business to and when to do it, it’s best to begin this process early. Say that your oldest child expresses interest in the business, but you’re not ready to retire for the next three years. Rather than waiting, you could bring them on to work directly under you for those three years. This way, they can learn from your example and find out how to run the business before they’re actually responsible for doing so. This will make the eventual transfer a lot more seamless.
Putting your plan in place
These tips can show you how to start, but business succession planning is still very complex. Make sure you know exactly what steps to take to create a plan that puts your family and your business in a good position.