It’s quite a transition to pass your business on to the next generation. It’s very important, both for your family and for the future of the company itself, that you know what steps to take as you do this.
Every business owner is in a unique situation, so different businesses would have different priorities. However, one of the best things to do is to begin the process by asking key questions about your business, your goals and how you want to accomplish them. Below are three of the top questions to get you started.
What is business succession planning anyway?
Succession just refers to handing the business down to the next generation, so the planning process addresses how that is going to happen and what steps you can take to make it go smoothly. For instance, many business owners will bring in the person who is receiving the business a few years prior so that they can train them on the job. For business owners with multiple children, planning may also include splitting up the roles that each will play in that company.
What happens if the owner cannot work?
There are situations where the owner is unable to work at the business, so succession doesn’t just happen when that owner passes away. It could happen if they are incapacitated, or if they suffer from certain disabilities.
As you make your succession plan, you can also plan ahead for these possibilities. Many people will hire temporary management to get them through the transition, some owners will have a plan in place to sell the business, if necessary, and others will just start the succession process at that point. There are many different options, but it’s just good to have this plan in writing in advance so that everyone knows what steps to take.
What do you do if an owner wants to sell their interest?
In some cases, one owner wants to sell the interest that they have in the business, but the other owners may not want to sell the business entirely. They need to buy them out, but this can be a financial burden. Sorting out the details of such a massive financial transaction can also be complicated at that moment, so it’s wise to do planning with the things like buy-sell agreements, shareholder agreements and operating agreements. This ensures that you have the structure in place in advance. You can then use it as needed, or it may never see use if everyone simply retains their shares.
If you have any other business questions, it’s important to know all of your legal options and the tools at your disposal.