Article Contributed by Karleia Steiner
Very few businesses survive into the second and third generation. Companies change hand, and the business struggles to survive. That’s a common occurrence when it comes to planning. Business legacy planning should be taken seriously, considering that only 30 percent of family-owned businesses survive into the second generation. Here are five simple steps to leaving your business legacy planning.
Five simple steps to leaving your business legacy
Be sure that the correct business structure is in place. Depending on the structure of the business, you may have to consider the type of ownership experience you’d like the next generation of leadership to inherit.
Create a vision statement
Draft a vision statement. The vision serves as a guide to how the business should look when it is transferred. The business should be protected from significant changes that contradict the core values of the business. The business and brand identity should be consistent and evident in the formalized vision statement for the business owner.
Consider management and partnership
Develop a formal management succession strategy. The plan should consider who will run the company and how it will be managed once you’re no longer in control. Partners should also be considered during this process. The hand-picked successors should be prepared to work with partners. The relationships should continue to be nurtured into the next generation of leadership.
Provide a way out for heirs
Equalize your estate so that all children who do not want to be a part of the business can submit other bequests in lieu of ownership in the business. You’ll also need a buy-sell agreement for family members who may have interest in the business. It isn’t uncommon for individuals to submit alternative bequests for your business. Identify early on who would like to be involved in the business.
Prepare a contingency plan
Protect your business against missteps. Earlier on during the initial transition phases, your business can be structured in away where previous leadership can take helm if the performance of the business suffers. In these cases, installment sales may be structured in a way where it hinges on performance.
No business owner works hard to see their life’s work end up in shambles once transferred to a different leadership. Your business affairs should be in order long before you every consider selling an interest in the venture, according to Frank Vandersloot. estate planning isn’t reserved for property and trusts; it is also a consideration in business continuation planning.
About the Author
Karleia is a freelance blogger. Away from the office she enjoys spending time with her daughters and husband.