So You Want to Pass the Business to the Kids…
1. START EARLIER THAN YOU THINK.
Every business and family situation is different. It takes some time to work through the process. Seek wise expert advice in the very early stages of the process, such as a good business attorney, estate attorney and tax advisor. Your expert advisors can help you determine what questions need to be asked and answered during the process that you may not have considered. It will take longer than you think to get everything discussed, drafted and in place.
2. FAMILY MEETING.
Discuss with your family what you envision for succession. Often, the next generation is not on the same page regarding the family business. Listen to your kids and get their input. They are going to need to understand your vision for business succession so they are able to cooperate and keep the business operating successfully after you are no longer in the company. Make certain your immediate family is involved in the process to the extent possible.
3. IDENTIFY YOUR SUCCESSOR(S).
Do you have more than one child? Maybe not all of your children are interested in the company, or maybe a number of your children are interested and could successfully operate the company. You can help lead the next generation to successfully operating the company by having a clear idea for the next leadership structure. Maybe it is a primary leader, or maybe it is a Board of Directors on which your children actively participate, with the company being led by a CEO from outside of the family.
4. DETERMINE THE SUCCESSION PLAN.
Once you have discussed your vision for succession with your family, work with your expert advisors to create the succession plan. This will include items such as:
• Determining how to transfer ownership of the company (stock sale or gift, utilization of a trust, etc.).
• Restructuring company governance.
• Creating corporate agreements such as buy-sell agreements.
• Determining the tax ramifications of succession options.
• Developing the succession plan timeline.
A very important part of any succession plan is making certain that your personal estate plan is coordinated with the company succession plan. It is not unheard of for a will to have terms that contradict the intended business succession plan, which may result in the courts having to decide what you wanted. Your business succession plan should help avoid probate rather than create probate issues.
5. PUT THE PLAN INTO ACTION.
Working with your expert advisors:
• Determine the timeline for the succession plan.
• Prepare and sign all necessary documents.
• Begin making personnel and policy changes in the company.
• Schedule the all-inclusive resort in Cancun!