Small businesses owners often need to find a way to have their business continue when they are no longer a part of the business. Retirement is the most common reason small business owners look to succession planning, but it is also important to plan for the unexpected death or disability event.
Common succession plans include having someone or some company continue the ownership of the business. This can be accomplished in various ways; selling the business to a similar business or competitor, hiring someone and grooming them to become the owner, or selling to the employees. Going into partnership with someone else that will eventually take over the business is also a common type of transition.
A properly designed succession plan can mean that employees are secure and customers are well taken care of in the case of a retirement or a sudden catastrophic event.
Life and disability insurance are often used to fund business transfers in the case of death or disability. Buy-sell agreements between owners are very important to insure smooth business transition as well as taking care of the disabled owner or family members remaining after a sudden death or disability.
Often, small business owners believe that “someone” will purchase their business in the case of death or disability, but this is often not the case. In a small business, the owner(s) can be such an integral part of the business that without that person or persons the business is not worth as much if anything. Small businesses usually lack written processes and procedures, so having someone else step in to run the business when a business plan or operational procedures are lacking can be catastrophic.
There are many considerations to succession planning and Baldwin CPAs have the resources to assist you with creating and implementing a plan for your business.
Think about what would happen to your business if you suddenly were not there. Is your plan in place? Do several people know where to look for the written plan should something happen to you?
Call us if you would like more information on how you can prepare a succession plan for your business.
Submitted by Suzan Ross, CPA, PFS, CGMA
