You’ve worked for years to build your business into what it is today. If it’s time to begin the next chapter in your life, you may want to pass down your family business to the next generation. Transferring your business to your children is a more complex process than many people realize.
Passing down your family business will involve more than a monetary business transaction; family members’ feelings can lead to complex issues. Working with an attorney at Verras Law to make a written plan that clearly states your goals and the steps you need to achieve them can help the process of passing down your business to the next generation go more smoothly.
Now Is The Best Time to Prepare for Business Succession
Starting the business succession process as early as possible can help your potential successors understand their role in the business’s future and gain the necessary experiences. Ideally, you should begin the succession process several years before you intend to retire. Starting the process sooner rather than later will also help you, your business, and your family if you experience a health crisis and can no longer manage your business or you pass away unexpectedly.
Determine Who Will Succeed You in Business
An essential part of succession planning is identifying potential successors who are well-suited to take over the management of your business. Potential successors could include a key employee, a family member, a partner, or an external buyer. Consider the potential successor’s skills, qualifications, and commitment to the possible succession to the business.
Create a Business Transition Plan
Working with an attorney to create a detailed transition plan can help the transition process proceed as smoothly as possible. The transition plan should outline how the transfer of ownership and management will happen. Specifically, you should define the roles and responsibilities, establish clear expectations, and set a timeline.
Determine the Fair Market Value of Your Business
Determining the fair market value of your business is a critical step in the succession process. Doing so will impact the sale price of your business or the equity share allocated to your business successor.
Consider Tax and Financial Matters
Working with a financial adviser and attorney can help you structure the business transaction deal in a tax-efficient manner. To minimize your tax liabilities, you should explore installment sales, gifting, or employee stock ownership plans (ESOP).
Communicate Your Plan with Your Successors
Talking about a business succession plan can be challenging, especially for those who own small businesses. However, it’s important to inform your key business partners, employees, and family about your succession plan. Transparency about what will happen can help the transition process remain smooth.
Create a Contingency Plan
Unexpected events can negatively impact a succession plan. Working with an attorney and financial advisor can help you develop a contingency plan. The plan should include provisions for what should happen if your chosen successor is unwilling or unable to take control of the business. Succession planning is an ongoing process. Reviewing your succession plan can help your plan reflect significant changes in your personal goals, business, and family dynamics.
Discuss Your Succession Plan with an Experienced Attorney in Florida
Creating a succession plan can help you protect yourself, your business, and your loved ones. It can also help you secure your legacy as a small business owner in Florida, allowing your hard-earned business to thrive and financially benefit you and your successors. When you transfer your business to a family member or sell to an outside buyer, attorney Spiro J. Verras is here to help. Don’t hesitate to contact Verras Law to schedule a complimentary case evaluation.