When you decide that your business needs to stay in your family, one option you need to think about is passing it on through your estate plan. Although you can pass on your family business before death, you may also determine that you want to stay in charge until the point when you no longer have the ability to be.
A good succession plan is important to making sure everything goes smoothly whenever you decide to pass on your business. This plan should take into account your business goals and objectives, appointments of certain individuals to particular roles and other details about how the business is to be run in the future.
What should you include in a succession plan?
An effective succession plan should have a number of topics discussed within. Components of the plan should include:
- Naming positions that need to be filled
- Discussing current incumbents and if they are at high-risk of death or incapacity. If so, naming a younger successor should be part of the plan
- Readiness ratings of those who may take over
- A timeline for succession once it begins
- Candidates for roles, if there are several, should be listed in this plan
Your succession plan should always be a collaborative effort. Should look for multiple candidates who are willing to take over the roles that will need to be fulfilled.
After you figure out who you want to have inherit your business, look into the succession plan and how you want to design it. Some people opt to create charts or documents; the design and layout of the plan is up to you.
Your attorney can help you with steps such as getting your business appraised, so that you can be well prepared to pass on the business with the right information about it included in the arrangement. This will help everyone stay on the same page moving forward.
Even if you’re young now, starting on your succession plan is a good idea. Death and incapacitation are largely unpredictable, so taking steps to protect your business and heirs now can make you feel more at ease.