Whether you’re the CEO of Disney or working towards becoming a company of that stature, it is essential to plan now for the possibilities of the future.
Lacking a succession plan (strategy for continuing the business if the owner(s) become temporarily or permanently indisposed) could lead to many problems for those connected to the business and its owner(s). These problems include, but not limited to, legal battles, business liquidation, and family’s income loss.
How do you CYB? Here are 3 tips to help you begin (or review) your plan:
1. Select Your Successor
A successor is not a person you appoint and automatically have set to run your business. Deciding on, and preparing a successor may require years to familiarize him or her with the finer points of your business. Thus, it is important to select a replacement as soon as possible to maximize the possibility of a successful transition. If you wish to pass your business on to future generations, you will need to make an honest assessment of the respective needs of your family and business, the qualifications of any interested family members, and whether the family and your business would be best served by a continued relationship.
2. Protect Your Business and Family
A fact of life is that our demise is inevitable. However, we are unsure of when this will occur. We also risk becoming disabled. Both scenarios can have a significant financial impact on your business and family. These are real risks that can be mitigated by creating a buy-sell or buyout agreements funded by life insurance. In general, these arrangements use the death or disability benefit proceeds to purchase the owner’s share of the business in the event of his/her untimely death or disability.
3. Consult with Professionals
The buy-sell and buyout strategies can be applied to small mom-and-pop shops or corporations. In either case, it will be necessary to consult with the appropriate legal, tax, and financial professionals to devise a plan of action that provides security for your business and your family. It is equally important to periodically review your succession plan to assure it remains consistent with changing circumstances. With proper planning, your objectives for business succession and securing your family’s future can be met.
Did you know that buy-sell arrangements can be a tax-deductible item for your business? Yes, it’s true – you can protect your business and deduct the costs!
-Dan Dillard
