An estate plan carries out your end-of-life wishes and ensures that you provide for your loved ones after your pass. Similarly, a succession plan provides for the future of your business when you are ready to retire or if something unexpected happens to you.
You may want to consider a succession plan for your business, particularly if you have a complex operation with multiple employees or other stakeholders. Address these key questions during your planning.
What is your preferred outcome?
Though you can close the business and liquidate the assets, you have a few options if you want the enterprise to continue under new ownership, including:
- Pass ownership to an heir
- Sell your stake to a co-owner or employee
- Sell the company to a third-party
The right option will depend on your specific needs. For example, if you would like to bolster your retirement funds, selling the company to a third party may make the most financial sense.
Does your plan set up the company for success?
Regardless of who ownership passes to, it is essential that your succession plan contains important details and documents to secure the continuity of the business. Make sure to include a timeline for the transfer process, information on operating procedures and anything else the new owner will need to ensure success.
Who should take over your business?
As a part of planning for your exit, you will want to carefully evaluate candidates or buyers to take over. Make sure to account for the possibility that your first choice is unable or unwilling to step into this position.
Your succession plan does more than just provide for you in retirement. It can also give the company’s stakeholders peace of mind and clarity about the future of the business.