Small businesses employ more than half of the domestic workforce and contribute greatly to the economy. But did you know that 90% of small businesses are family-owned and that most of those do not make it past the third generation of family ownership? That’s because many small business owners neglect to create a business succession strategy.
What is a business succession strategy?
A business succession strategy is a plan that dictates the ownership of a business be passed from an owner to a buyer with protections to ensure both parties’ best interests are taken into account. There are many considerations when creating a business succession strategy, such as the financial and legal aspects of succession planning. An experienced Tampa estate planning lawyer will often discuss succession strategies with small business owners at the early stages of business planning since it’s never a guarantee how long the business owner will be able to run the business. Illness, incapacitation, and even death can strike at any time, so small business owners should think about a succession strategy from the moment they hang out their shingle.
Considerations for your business succession plan
Business owners should think about whether they want the business to stay in the family, if it should transition to a business partner or trusted employee, or if they would like to sell it to an outside party. This could always change throughout the life of the business, but it’s good to consider all the options and visit your plan regularly to ensure it still fits your wishes.
In addition, the business succession strategy depends on what type of business entity is being created, whether it’s an LLC, Corporation, Partnership, or Sole Proprietorship. An experienced estate planning attorney will sit down with the small business owner to discuss these details and determine the best course of action.
Good business succession planning takes time
A successful business succession plan is something that takes time to accomplish. There are many moving parts in a business succession strategy, such as creating a transition team, proper documentation, and sound financial planning. All of these pieces have to be managed carefully to make sure the business remains viable after the transition and that both the original owner and new owner are protected. Business planning lawyers take great care to craft a business succession plan that accomplishes these goals and provides peace of mind to all the parties involved, often with the help of financial planners, tax professionals, and sometimes even experienced exit strategy coordinators.
A business succession strategy is one of the most important things a small business owner must create. If done incorrectly, a large amount of money can be lost, and the business may not survive the transition. If you have any questions regarding business succession planning, or if you’d like to begin implementing a business succession strategy, please call us at (813) 438-8503 to set up a consultation.