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Creating a succession plan for your small business

California business owners work hard to grow their company and ensure it thrives. Proper planning can ensure it continues and has protection from unexpected tax liabilities after you pass away. We often help clients develop plans to ensure their business benefits their partners or family after they are gone.

Fidelity reports that a succession plan enables the transfer of ownership and management of a business. Even if your company has already been in operation for decades or generations, you may wish to sell it. One of the most common reasons is an attractive purchase offer for its assets. Another reason is that no one in the family shows interest in its continuity. However, you can take steps if you wish the business to remain with your beneficiaries.

Durable power of attorney

A comprehensive succession plan includes designating a power of attorney. Putting your wishes in writing now ensures a person you trust can act on your behalf if you become incapacitated. A durable power of attorney gives control of your affairs to this person. It can also include a comprehensive business plan that transfers business holdings and assets to another business entity. Benefits of this action include the following:

  • Asset protection
  • Valuation of the business
  • Tax considerations
  • Preparing for management succession

Successful exit strategy

If you want the company to remain in your family, a well-developed succession plan secures your legacy. Without one, your beneficiaries may have to sell the company without getting the full value of its worth. In the same way that you did not build your business in a day, you cannot simply hand the reigns to your successor one day. Planning and training are critical to its ongoing success.

A succession plan covers many areas of the business, including who will run the company and how to minimize taxes. Preparing for your successor can help ensure your small business thrives after your passing.