Estate planning is a complex process that becomes more complicated when it involves a family business. Ownership of a successful enterprise requires proactive steps to ensure that it will thrive long after a leader’s retirement or death.
A recent study revealed that 60 percent of family business leaders in North American have an emergency succession plan in place should something unexpected occur.
Proactive Steps Can Make a Difference
Business succession plans are paramount when passing the proverbial torch to a family member. A smooth transition is essential for various parties, including the executive team and staff members at all levels who rely on the company for their jobs.
Large, family-owned businesses often have multiple generations serving in various roles. Over time, some stand out as potential successors. The best succession plans are more formal and based on the best candidate, not necessarily defaulting to the spouse or eldest offspring.
While no one wants to talk about ending a career, let alone the end of their life, business leaders should discuss succession with their family members. Ideally, ongoing conversations should occur long before retirement is even an option. Topics should cover what it means to be a business owner and the day to day challenges that come with running a business.
Ideally, those more informal talks should eventually be “memorialized” with a legal document that spells out the responsibilities of surviving loved ones. Should a leader fall ill or pass away unexpectedly, a successor must step in quickly to provide leadership and stability during a difficult transition.
Peace of mind is paramount for leaders, family members, and everyone who relies on a steady paycheck from an employer. Chaos can lead to the most successful of enterprises shutting down and liquidating assets.
It is never too early to prepare a succession plan for a company, but it can be too late. The stakes are high. Sacrifice and sweat equity went into establishing operations. Careful legal steps can preserve that legacy long into the future.