Have you developed a succession plan for your business?

06 Oct, 2020

On Behalf of Mack & Mack Attorneys | business law

Perhaps you have been so busy building a successful company that you have not yet considered how to pass it along when the time comes.

There are various options for developing a succession plan that goes into effect when you retire or when you die.

Creating your succession plan

The first task is to create a succession plan that will allow a smooth transition for the ownership and management of the business. Pertinent points include:

  • Developing and training your successors
  • Delegating responsibility and authority
  • Planning for the retention of key employees
  • Coordinating the roles between business owners and managers
  • Considering the best interests of both the business and the owner’s family
  • Planning the timing of the business transfer during your lifetime

Leaving the business to co-owners

If you plan to leave the business to your partners or co-owners, you can create a buy-sell agreement. You can also establish an irrevocable life insurance trust or ILIT to provide the liquidity necessary for such a transfer.

Leaving the business to family

If you wish to transfer the business to your family members, you might consider setting up a grantor retained annuity trust or GRAT. This will also allow you to retain a source of income. Moreover, the trust offers protection in that any business appreciation will not be subject to estate taxes. Another way to minimize taxes is to establish a family limited partnership to hold the assets of the business.

Looking ahead

There are many benefits to creating a succession plan that benefits you, your family, and, if applicable, your co-owners. With the appropriate legal guidance, you can find answers to any questions you might have as you develop a plan that works for the future of your business.

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