If you own and operate a small business, you know the time and the effort it requires simply to reach and maintain a certain level of success. Many companies are in operation for years before they begin to make a profit, and you may have placed a significant amount of your personal wealth, time and creativity into making your business thrive. You worked hard to make it what it is, and now is the time to ensure that your business has a strong foundation for the future.
As part of a complete estate plan, you may consider the benefits of creating a business succession plan. This is an outline for what you want to happen to your company in the future, including how you want your heirs to treat your business and who you want to step into your role. While a succession plan is beneficial in the event of your death, it also allows you to plan for your eventual retirement or the possibility of incapacitation in the future.
What should be in your plan?
You can custom-tailor your business succession plan to suit your individual needs and goals for the future of your business. While there is no one-size-fits-all plan for what is next for your company in case of death, incapacitation or retirement, the following questions may help you decide how to include terms that will provide protection and benefits:
- Do you have a specific person you want to be your successor? Is that person aware of your choice, and will he or she need training in order to effectively step into that role?
- What is your business worth, and what is a fair value for the purchase of your company if you or your successor sells in the future?
- Do you have business partners who should have a say in the plans you are making for your business?
- Do you have the right type of insurance policy necessary to cover your company in case of your unexpected death or other type of emergency?
Planning well for the future of your business is important, regardless of the size of your company or the type of work you do. The future is unpredictable. Having a plan in place will secure your business interests in various scenarios that could impact your heirs, your employees, your business partners and others.