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Succession Planning is Essential for Business Well-Being
Succession planning is a crucial tool that provides a blueprint for company advancement. Business owners can strategize to determine how employees will advance through the firm, as well as those who will take over at a later date.
When owners fail to participate in succession planning they often face serious challenges if essential employees resign or are terminated. Furthermore, companies can experience dire consequences if owners unexpectedly die or encounter health issues.
Benefits of Creating a Business Succession Plan
One of the greatest benefits of putting together is succession plan is company assets are protected. Another is business operations can continue in the event of emergency. This is accomplished by identifying senior management and other key personnel.
Selecting staff members who are placed in top positions, along with those who will advance through the ranks ensures everyone is trained to take on new responsibilities. Every business owner needs a successor who is trained in all aspects of their job to ensure they can take over at a moment's notice.
Additionally, at least one staff member needs to be trained to take over the designated successor's job. Cross-training employees let companies stay intact during challenging times. It also enables the business to transition more easily as it expands.
One more advantage of succession planning is companies tend to have a higher employee retention rate. Employees who know they will be promoted are usually more motivated to perform at their best.
Business owners who spend time building a prosperous company ought to utilize strategic planning to make certain the company thrives. Advanced planning helps owners be prepared in the event the company experiences rapid growth or if key employees resign.
Importance of Family Succession Planning
Business succession planning is of particular importance to family owned entities. Establishing plans to transfer ownership to family members is often tied-in with estate planning.
The kind of plans involved will depend upon the type of business entity and what happens to it if the owner dies.
When company owners have a spouse or children who are not employed with the business, a decision must be made regarding who will inherit the company or if it will be sold.
One major consideration of family succession planning is developing strategies to reduce tax liabilities. Heirs can potentially face estate tax that equates to as much as 50 percent of the company's value.
The best approach is to transfer business assets to a trust. Setting up family trusts can be complicated, especially when business ownership is involved. It is always advisable to work with an estate planning law firm to ensure the proper strategies are utilized.
Succession Planning for Small Business Owners
Small business owners need to prepare plans for transferring ownership of their company at a later time. Plans should identify the individual responsible for handling the transfer, as well as developing strategies to address tax liabilities and cash flow.
Small business succession plans encompass a variety of factors associated with business ownership. Owners should become a mentor and share the philosophies that make the company successful to those who will acquire the company. The goal should focus on ensuring successors can carry on without interruption when the current owner departs.
Companies that are transferred to new owners are taxed by the Internal Revenue Service. For this reason, plans will need to address the person responsibility for paying taxes. Plans also need to be developed to make certain adequate funding for expenses related to the transfer such as lawyer fees and recording documents with the court.
Other Business Planning Strategies
Owners ought to prepare power of attorney documents that authorize agents to perform important business tasks. Most often a durable or general power of attorney is used. These forms let agents take over owner responsibilities such as paying company expenses, employee payroll, or buying or selling assets.
Other strategies include engaging in estate planning and retirement planning. A good source for learning about the various methods is provided by Curt Craton succession plan lawyer at BestEstatePlanningTrusts.com.