For family businesses to succeed and remain in operation from one generation to the next, succession planning is a crucial procedure. Early succession planning is crucial, and each plan should be customized to meet the particular requirements of the company. Various aspects, including financial consultants, estate planners, legal agreements between generations, transfer of ownership structure, transition timelines, and goals must be carefully taken into account for a succession plan to be successful.

In this article, we’ll cover time–tested strategies for family business succession planning.

Identify your desired outcome

The first step in developing a sound succession plan is identifying your desired outcome. Are you hoping for an orderly transition or are you purely focused on protecting the future of your family business? Consider what will be best for the organization and its stakeholders, keeping in mind that everyone engaged should be able to flourish after the process is over.

Establish roles and talk about arrangements

Then, decide how much control you want each member of your family to have over choices made within the business once ownership has changed. If roles need to be established, do so, and be sure to explain expectations openly so that everyone involved knows who is responsible for what decisions at any given time both during and after the transitioning process. Particularly if the succession plan calls for the current owner’s death, this communication is crucial to ensuring that everyone involved feels safe at this challenging time in their lives.

Set up an ownership structure

Third, establish a transfer of ownership structure. Will it take place through a sale or donation? If this step involves a sale, decide how you will ensure the buyer is qualified and trusted to maintain your family’s legacy and vision for the company. 

Consider tax regulations

Recognize as well how the estate tax regulations in your state may apply to you. The amount that can be transmitted to recipients is typically severely constrained by the estate tax that is normally in existence.

Have an estate plan in place

It’s also wise to have an estate plan in place. An estate plan ensures that all assets are identified and distributed in accordance with the law. This is applicable to documents like wills, trusts, and powers of attorney, among other things.

Make a timeline

Plan out the timeline for transferring ownership. Set clear and achievable goals and deadlines that will help with ensuring the process stays on track throughout its duration. 

Talk to a financial advisor

Finally, consult with experienced financial and legal advisors. Make sure you have all your paperwork in order so that everyone involved is protected should any issues arise with the transfer of ownership or other aspects of the succession planning process. 

Work with our team and we’ll help you plan out the perfect succession plan for your family business. 

At Independent Financial Services we have professionals that can guide investment strategies, tax-efficient savings options, and retirement and succession planning. 

Contact us today to learn more about how we can help you ensure your business’s longevity and success!

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.