When an entrepreneur starts a business, it can sometimes be hard to imagine anyone else doing their job. Small business owners can pour years, even decades, of hard work into getting their processes, vendors, and contracts in place. But as the years press on, eventually you may want to slow down. Then the question becomes who do you want to run your business when you retire?
Choosing The Right Successor To Run Your Business When You Retire
Succession planning should never be a personality contest. When you have deep, sometimes family ties to key staff members they can seem like obvious choices to carry on once you retire or step away from day-to-day management of the company. However, entrepreneurs know, family priorities and smart business decisions don’t always go hand in hand. Your oldest child may be the person you connect most deeply with and want to be successful, but if he or she doesn’t understand the practicalities of running a business, it could end in disaster.
Part of successful strategic planning is choosing the right successor to run your business after you step away. Remember that ownership and management do not have to fall to the same person. You can ensure that your children reap the benefits of the business even if their skillsets are not suited to the task of running it. In deciding who should be your company’s next CEO, take a close look at the strengths and weaknesses of your trusted staff. Choose someone with a mind for your industry that you can recruit and train to increase your chances of success.
Building A Succession Planning Strategy To Empower Your Successor
It is a rare circumstance indeed when a potential successor is ready to step into the job on day one without training. That is why the best succession plans start 5 or even 10 years before you plan to retire. You need time to empower your successor and give him or her the tools to pick up where you leave off.
By developing a succession planning strategy early, you can plan – and budget – for your successor to attend leadership training, receive necessary certifications, and learn what happens behind the curtain over time, instead of being thrust into the role on short notice. This will also give you a degree of increased control, as you will be able to show your replacement why you have made the choices you did along the way.
Family Businesses Bring Estate Planning Concerns
Whether you hand business operations over to the next generation, or plan to have your successor purchase the company from your family when you are gone, you will need to consider the estate planning implications of passing on the family business. Depending on the value of the company, and the size of your estate, your loved ones could be faced with substantial estate tax consequences when they inherit their ownership interests.
There are ways to work around this, if you work with a business succession and estate planning attorney in advance. For example, you can structure a gradual buy-in or gifting of smaller interests that allow your heirs to take ownership one piece at a time and stay below the tax threshold. You may also be able to plan that the estate is divided between several family members, to divide the tax burden, offsetting the corporate interests with other property or liquid assets you control.
Finding the right person to run your business when you retire should not be as simple as looking at the family tree. If you are beginning to consider your exit strategy, you should sit down with an attorney who focuses on business succession planning now. The lawyer will help you consider your options objectively, so you can make the best decision for based on your priorities and your company’s bottom line.
The Cronin Law Firm has experienced attorneys to aid with whatever legal issue you’re facing. If you are planning for your company’s future or to protect your family business after you are gone, contact The Cronin Law Firm today to schedule a consultation.