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BUSINESS SUCCESSION PLANNING FOR THE FAMILY BUSINESS

Successful businesses handle a variety of changes. One of the most difficult can be the change of ownership that occurs when the original owner decides to retire or otherwise leaves the business. Unfortunately, many businesses do not take the time to develop a succession plan. Taking some time to put the right plan in place can help reduce many of the risks associated with this transition.

Business succession planning can be particularly difficult with a family business.Determining who will continue leading the company is one of the most important steps to a successful plan. Unfortunately, this can easily become a loaded question when family members feel entitled to the position.

A few simple steps can help to better ensure that even family businesses transition into new ownership smoothly.

Tips for Planning a Smooth Transition

The first step involves looking ahead. Putting a successful plan in place is not something that should be done at the last minute; it often takes years to execute a successful transition. In fact, financial experts recommend business owners begin planning for the change five years in advance. This allows the owners enough time to consider who is best to run the company and what type of experts should be called in to ease the transition.

When attempting to determine the best successor for the business, it is often wise to focus on the business's needs instead of attempting to keep family members happy. This may result in looking within the company for employees to fill leadership roles instead of looking around the dinner table. Although this may cause some tension in the short term, in the long term it will likely result in a more successful business, and, at the end of the day, a successful business is what's best for the entire family.

When reviewing candidates for the position, it can help to have some key characteristics in mind. These can include the ability to formulate, execute and evaluate various business strategies.

Once a successor is chosen, set up a training program to cover both the executive duties covered by the position and the basics of the organization. By having a more thorough understanding of the company, successors may be more likely to succeed in their new role.

In addition to determining the best candidate to step in and take over the business and training that individual, it is important to know which experts to consult when developing a successful succession plan.

Depending on the size and scope of the business, it is likely a good idea to consult both financial and legal experts before putting a succession plan into action. These professionals can help to determine the best ways to pass the business interest to the family and handle the various taxes that are often connected to business succession. This can include income, gift and estate taxes.

Although developing and implementing a change in ownership can seem intimidating, reaching out to the right professionals can help ease the change and increase the odds of a smooth transition. As a result, speaking with an experienced business succession planning lawyer can help to better ensure this important asset is preserved.