Keeping it in the Family
For family businesses to succeed and remain in operation from one generation to the next, succession planning is a crucial procedure. Early planning is crucial, and each plan should be customized to meet the particular requirements of the company. Various aspects, including financial consultants, estate planners, legal agreements between generations, transfer of ownership structure, transition timelines, and goals must be carefully considered for a succession plan to be successful.
In this article, we’ll cover time-tested strategies for family business succession planning.
Identify your desired outcome
The first step in developing a sound succession plan is identifying your desired outcome. Are you hoping for an orderly transition or are you purely focused on protecting the future of your family business? Consider what will be best for the organization and its stakeholders, keeping in mind that everyone engaged should be able to flourish after the process is over.
Establish roles and talk about arrangements
Then, decide how much control you want each member of your family to have over choices made within the business once ownership has changed. If roles need to be established, do so, and be sure to explain expectations openly so everyone involved knows who is responsible for what decisions at any given time both during and after the transitioning process. Particularly if the succession plan calls for the current owner’s death, this communication is crucial to ensuring everyone involved feels safe at this challenging time in their lives.
Set up an ownership structure
Third, establish a transfer of ownership structure. Will it take place through a sale or donation? If this step involves a sale, decide how you will ensure the buyer is qualified and trusted to maintain your family’s legacy and vision for the company.
Consider tax regulations
Tax ramifications from a business sale can drastically change the final outcome. Consult an expert who has experience preparing & educating you on the impact of taxes before and after the sale. Mistakes because of poor tax planning can be avoided by reaching out to the right advisors. Remember, a successful transition starts years before the actual sale takes place.
Have an estate plan in place
It’s also wise to have an estate plan in place. An estate plan ensures all assets are identified and distributed in accordance with the Grantor’s wishes. Having a plan in place also helps beneficiaries understand how and when assets will be transferred at death.
Make a timeline
Plan out the timeline for transferring ownership. Set clear and achievable goals and deadlines to help ensure the process stays on track throughout its duration.
Talk to a financial advisor
Finally, consult with experienced financial and legal advisors. Make sure you have all your paperwork in order so everyone involved is protected should any issues arise with the transfer of ownership or other aspects of the succession planning process.
Every business transition requires a team of experienced professionals to help navigate the technical aspects of selling your business and planning your next life. Let our Certified Financial Planner Professionals™ (CFP®) and Certified Exit Planning Advisors (CEPA®) be a part of that experienced team.
Jodi Perez, CFP®, CEPA
Financial Advisor, Raymond James
20635 Amberfield Drive, Suite 102
Land O’Lakes, FL 34638
Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Independent Financial Services is not a registered broker/dealer and is independent of Raymond James Financial Services.
Written By: Jodi Perez
As a Certified Exit Planning Advisor (CEPA®), Jodi can work with business owners to help develop a team of professionals to create positive change and enable successful exits regardless of the timing.